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By  JOHN  M.  BONHAM 

INDUSTRIAL  LIBERTY.     An  Analysis  of  the 
Existing  Conditions  in  the  United  States,  with 
Special  Reference  to  the  Relations  to  the  Pub- 
lic of  Railways  and  Trusts.    8°,  pp.  iv.  -f-  4*4, 

SECULARISM,   Its  Progress  and  Morals. 

$1.50 
1.75 

RAILWAY  SECRECY  AND  TRUSTS. 

No.  51  in  Questions  of  the  Day  Series.     12°, 

I.OO 

G.  P.  PUTNAM'S  SONS 

NEW  YORK                                              LONDON 

QUESTIONS  OF  THE  DAY  SERIES.    No.  LXL 


RAILWAY  SECRECY 
AND  TRUSTS 


BY 


JOHN   M.  BONHAM 

AUTHOR  OF  "  INDUSTRIAL  LIBERTY  ' 


NEW  YORK  &.  LONDON 

G.   P.    PUTNAM'S   SONS 

ftty  f  ttitherbother  f  rcss 

1902 


COPYRIGHT  BV 

JOHN  M.  BONHAM 

1890 


GENERAL 


Imicfeerbocfeer  press,  Hew 

Electrotyped  and  Printed  by 
G.  P.  Putnam's  Sons 


PREFACE. 


IN  dealing  with  the  subject  of  railway  secrecy 
and  its  relation  to  Interstate  Commerce  legisla- 
tion, it  has  seemed  to  me  to  be  necessary  to 
make  frequent  applications  of  the  fundamental 
rule  of  equal  industrial  liberty.  Whilst  some 
repetition  is  thus  employed,  if  this  conduces  to  a 
better  understanding  of  the  subject  I  may  hope 
it  will  be  overlooked. 

I  do  not  wish  to  be  understood  in  any  thing  I 
say  as  favoring  hasty  remedial  legislation.  I  am 
quite  aware  that  sudden  dealing  with  even  great 
and  real  evils  often  involves  grave  disturbances 
in  the  body  politic,  and  may  seriously  affect 
rights  which  are  in  no  way  responsible  for  the 
existence  of  these  evils.  Moreover,  any  legisla- 
tion upon  so  comprehensive  a  problem,  to  be 
thoroughly  remedial,  must  reach  its  adaptations 
through  slow  and  tentative  means.  My  aim  is 
rather  to  contribute,  as  far  as  I  can,  to  a  better 
understanding  of  what,  in  my  opinion,  consti- 
tutes the  chief  evil  of  railway  management; 


96023 


6  PREFACE. 

and  it  has  seemed  to  me  proper  to  divest  the 
problem,  as  far  as  possible,  of  the  consideration 
of  mere  detail,  in  order  that  thus  I  might  the 
more  clearly  indicate  the  foundation  upon  which 
reform  should  rest,  and  the  direction  in  which, 
by  deliberate  stages,  it  should  progress. 

JOHN  M.  BONHAM. 

NEW  YORK,  January  i,  1890. 


CONTENTS. 


PAGB 

CHAPTER  I. — THE  TRANSPORTATION  PROBLEM        .      9 

Fundamental  Principles — The  Relation  of  Trusts  to  the 
Problem— Two  Classes  of  Trusts— The  Permanently  Vicious 
Elements  in  Trusts  of  the  First  Class — Secret  Alliances 
with  the  Railways — Trusts  of  the  Second  Class  ;  Their 
Tendency  to  Destroy  Themselves — Illustrations — Corporate 
Form  and  Amount  of  Capital  not  in  Themselves  Neces- 
sary Evils — The  Tariff  and  the  Trust — Strikes  and  Corners 
— The  State  and  the  Remedy. 

CHAPTER  II. — EXISTING  RAILWAY  MANAGEMENT  .    36 

Mr.  Charles  Francis  Adams'  Statement  of  the  Case — 
Evasions  of  the  Interstate  Commerce  Law — The  Systematic 
Character  of  Railway  Secrecy  —  Corporate  Secrecy  and 
Individual  Privacy — The  Opportunity  in  Railway  Secrecy 
for  Unlawful  Discriminations  —  The  Failure  of  Honest 
,  Management  under  Existing  Conditions — The  Reasoning  of 
the  Railway  Managers  in  Justification  of  Present  Methods 
— Its  Effect  upon  Business  Morals — The  Origin  and  Evolu- 
tion of  the  Existing  Status — The  Impossibility  of  Reforming 
the  Inherent  Evil  of  Railway  Management  by  those  in 
Control  of  the  Railways. 

CHAPTER  III. — PUBLIC  RESPONSIBILITY  FOR  EXIST- 
ING EVILS 59 

The  Desire  for  Physical  Convenience,  and  its  Influence 
on  Railway  Development — The  Confusion  of  Causes  and 
Incidents  in  the  Multiplication  of  Conveniences  —  The 
Changes  in  Public  Opinion,  and  their  Expression  in  Hostile 

7 


CONTENTS. 


State  Legislation — The  Interstate  Commerce  Law,  and  the 
Methods  Employed  to  Evade  its  Provisions — Mr.  Adams  on 
the  Workings  of  the  Interstate  Legislation — His  Proposed 
Remedy  through  Legislative  Sanction  to  Compacts  between 
the  Railways — The  Inefficiency  of  Such  Remedy,  and  its 
Violation  of  Fundamental  Right — The  Corporation  as  an 
Arbiter  of  the  Right  of  the  Citizen — The  Necessity  for  a 
Supervising  Power  at  once  Efficient  and  Disinterested. 

CHAPTER  IV. — THE  GOVERNMENT  AND  THE  RAIL- 
WAYS           81 

The  Claim  of  the  Corporation  to  Immunity  from  Examina- 
tion— The  Proper  Limit  of  State  Interference — Paternalism 
not  Involved  in  Such  Interference — The  Inadequacy  of  Past 
Legislation — The  Character  of  the  Necessary  Legislation — 
Public  Sentiment  in  its  Bearing  upon  the  Stages  of  Railway 
Development  —  The  Early  Opposition  to  Railways  —  The 
Era  of  State  Aid  and  Encouragement  —  The  Period  of 
Railway  Oppression  and  Retaliatory  Legislation — The  Be- 
ginnings of  the  Period  of  Examination  into  Political  and 
Economic  Principles. 

CHAPTER  V. — THE  EFFECTS  OF  STATE  INACTION    .  106 

The  Relation  of  Government  Inaction  to  the  Growth  of 
Co-operative  Organizations  —  The  Activity  of  Railway 
Managers  in  Enlarging  their  Interests  and  Power — The 
Enlargement  of  Trunk  Lines  not  Objectionable — Objec- 
tions to  the  Consolidation  of  Trunk  Lines — The  Effect  of 
Consolidation  on  Industrial  Right — The  Present  Stage  of 
Public  Opinion  as  Derived  from  Past  Experience  of  Rail- 
way Methods — The  Argument  from  Analogy  in  Favor  of 
State  Supervision  of  Railways — The  Inadequacy  of  Legis- 
lation Directed  against  the  Trust  as  Such — The  Source  of 
the  Evil  in  Secret  Combinations  of  the  Trust  and  the 
Railway — The  Necessity  of  Government  Interference  to 
Prevent  Such  Combination — The  Advantages  of  Initiative 
Federal  Action,  and  the  Probable  Necessity  for  a  Consti- 
tutional Amendment — Centralization  not  Implied  in  Such 
Federal  Legislation. 


4  RAILWAY  SECRECY. 


CHAPTER  I. 

THE   TRANSPORTATION    PROBLEM. 

Fundamental  Principles — The  Relation  of  Trusts  to  the  Problem — 
Two  Classes  of  Trusts — The  Permanently  Vicious  Elements  in 
Trusts  of  the  First  Class — Secret  Alliances  with  the  Railways — 
Trusts  of  the  Second  Class  ;  Their  Tendency  to  Destroy  Them- 
selves— Illustrations — Corporate  Form  and  Amount  of  Capital 
not  in  Themselves  Necessary  Evils — The  Tariff  and  the  Trust — 
Strikes  and  Corners — The  State  and  the  Remedy. 

THERE  is  one  method,  and  I  think  only  one, 
that  will  enable  us  to  arrive  at  an  ultimate  and 
comprehensive  realization  of  the  transportation 
problem.  It  is  to  subject  all  expedient  and 
intermediate  policies  to  a  rigorous  application  of 
fundamental  principles.  This  method  is  not 
fraught  with  any  great  difficulty.  These  prin- 
ciples are  themselves  not  abstruse  or  hard  to 
understand ;  nor  is  their  application  to  the  prob- 
lem difficult.  Moreover,  the  remedial  process 
which  is  thus  invoked,  so  far  from  involving 

9 


10  RAILWAY  SECRECY. 

any  surrender  of  industrial  activity,  or  from 
lessening  any  true  industrial  advantage,  will 
rather  tend  to  stimulate  a  more  wholesome 
growth,  and  at  the  same  time  secure  more  per- 
manent and  more  widely  diffused  results. 

Let  us  assume  that  what  we  need  above  all 
things,  as  the  first  condition  of  political  and  in- 
dustrial well-being,  is  a  republican  government, 
not  only  in  form,  but  in  essence ;  a  government 
with  all  the  sanctions  that  are  necessary  for 
political  freedom.  Let  us  assume  that  this 
political  freedom  means  the  real  industrial 
equality,  before  the  law,  of  every  citizen;  his 
equal  security  in  person  and  property.  And  in 
order  that  my  meaning  as  to  what  constitutes 
equal  industrial  right  may  be  entirely  definite,  I 
will  say  that  such  right  does  not  pre-suppose 
any  equality  among  men  in  respect  to  individual 
skill  or  business  capacity;  nor  does  it  have  to 
do  with  the  amount  of  individual  or  associated 
capital.  It  does  import  the  exactly  equal  right 
of  each  citizen  to  the  exercise  of  the  skill  with 
which  he  may  be  endowed,  and  to  the  employ- 
ment of  the  capital  of  which  he  may  be  possessed. 
Any  organization,  political,  corporate,  or  asso- 
ciate, which  tends  to  interfere  with  industrial 
equality,  must  submit  to  such  restraint  as  is 
necessaiy  to  make  its  methods  consistent  with 
this  equality ;  and  this  restraint  will  have  to  be 


THE  TRANSPORTATION  PROBLEM.  II 

secured  by  the  State  through  constant  inspection 
and  regulation. 

These  points  being  assumed,  the  next  step 
will  be  to  analyze  the  mischiefs  to  be  corrected 
— those  specific  practices  which  are  to  be  judged 
by  this  equal  right, — and  I  may  say  that  as  we 
progress  in  this  analysis  it  will  be  found  that 
some  at  least,  and  it  may  be  many,  of  the  inci- 
dents of  industry  which  we  have  been  in  the 
habit  of  treating  as  political  and  industrial  evils 
are,  in  fact,  not  evils  at  all ;  and  that  some  of  the 
other  incidents  which  are  real  evils,  and  which 
we  are  accustomed  to  regard  as  necessary  and 
unavoidable,  are  evils  which  can  be  extirpated 
by  the  application  of  the  principles  suggested. 

Taking,  then,  as  a  postulate,  equal  industrial 
right  before  the  law, — and  taking  it  not  as  a 
mere  sentiment,  but  as  a  practical  measure  to  be 
definitely  applied  to  our  industrial  relations, — I 
will  first  endeavor  to  make  an  analysis  of  those 
devices  which  are  called  trusts ;  then  of  the  sys- 
tem of  transportation  in  relation  to  certain  of 
these  trusts ;  then  of  the  whole  system  of  trans- 
portation and  trusts  in  relation  to  the  funda- 
mental principles  of  equal  industrial  right. 

I  am  fully  aware  that  there  are  innumerable 
instances  of  secrecy  and  evasion  in  railway  man- 
agement which  are  unconnected  with  trusts. 
These  I  shall  notice  hereafter.  At  present  I 


12  RAILWAY  SECRECY. 

choose. to  make  use  of  the  trusts  in  order  to 
indicate  the  qualities  of  the  problem,  because 
some  of  them  afford  the  most  typical  illustra- 
tions of  the  last  and  greatest  menace  to  industrial 
liberty. 

Trusts  have  not  yet  been  properly  discrimi- 
nated, and  such  a  discrimination  is  necessary  to 
a  correct  understanding  of  them.  The  name  has 
been  applied  to  a  variety  of  artificial  organiza- 
tions which  agree  only  in  their  outward  appear- 
ance, behind  which  there  are  often  essential 
differences.  Some  of  the  trusts  have  in  them 
permanently  vicious  elements,  whilst  others, 
although  not  by  any  means  harmless  in  their 
effect  upon  political  right,  are  so  incapable  of 
working  prolonged  and  serious  mischief,  that 
they  may  be  left  to  the  usual  methods  of  relief 
or  to  their  own  inevitable  dissolution. 

The  trusts  which  we  have  principally  to  con- 
sider (and  they  comprise  nearly  all)  are  those 
organized  for  dealing  in  commodities  which  are 
mainly  transported  by  rail.  It  will  be  found 
upon  examination  that  the  essential  differences 
between  these  different  trusts  are  to  be  ascer- 
tained, not  by  their  names  or  external  char- 
acteristics, but  by  their  internal  structures; 
that  is  to  say,  only  by  a  careful  study  of  their 
inward  workings.  In  seeking,  then,  to  analyze 
these  trusts,  with  a  view  of  ascertaining  their 


THE  TRANSPORTATION  PROBLEM.  13 

relation  to  the  transportation  problem  and  to 
industrial  right,  we  may  group  them  in  two 
general  classes.1 

The  first  class  embraces  all  trusts  which, 
having  and  maintaining  secret  agreements  with 
those  corporations  which  transport  the  product 
from  producer  to  consumer,  are  by  this  means 
enabled  to  exert  an  arbitrary  control  over  the 
industries  with  which  they  deal.  Under  this 
class  come  such  trusts  as  the  Standard  Oil 
Trust,  the  Cattle  Trust,  and  the  Cotton-seed  Oil 
Trust. 

The  second  class  embraces  those  trusts  which 
do  not  depend  upon  secret  relations  with  the 
transporter,  but  which  aim,  through  combina- 
tion, to  secure  the  unified  possession  and  control 
of  the  whole  of  any  particular  industry,  and 
then  by  the  exercise  of  the  power  secured 
through  this  combination,  to  repress  production 
and  competition,  and  thus  to  enlarge  the  margin 
of  profit.  Under  this  class  come  such  trusts  as 
the  Salt  Trust,  the  Rubber  Trust,  the  Lead 
Trust,  the  Sugar  Trust,  the  Carpet  Trust,  the 
Conin  and  Undertaker's  Supply  Trust,  and  the 

1  Besides  these  trusts,  there  are  those  which  are  organized  and  con- 
ducted in  municipalities,  such  as  the  illuminating-gas  trusts.  There 
is  also  another  trust  which  is  organized  for  monopolizing  natural  gas 
— the  Natural-gas  Trust ;  but  as  these  are  not  related  to  the  subject  of 
railway  transportation,  and  as  the  discussion  of  them  would  rather 
tend  to  complicate  the  subject,  I  have  chosen  to  omit  them. 


14  KAIL  WAY  SECRECY. 

Dental-tool  Trust.     Some  of  these  aim  to  con- 
trol products  which  have  a  tariff  protection.1 

I  will  take  the  Standard  Oil  Trust  as  a  typi- 
cal example  of  a  trust  of  the  first  class.  The 
Standard  Oil  Company,  from  which  it  devel- 
oped, in  the  early  histoiy  of  its  organization 
had  a  capital  which  consisted  chiefly  of  power 
conferred  upon  it  by  two  agreements,  through 
which  it  obtained  secret  rebates  from  the  prin- 
cipal trunk  lines,  not  only  for  the  shipments  of 
oil  which  it  made,  but  also  for  the  shipments 
made  by  its  competitors.2  So  equipped,  this 
trust  aimed  to  paralyze  competition.  By  its 
capitalization  of  this  power  it  has  been  enabled 

1  So  far  as  I  have  been  able  to  obtain  information  concerning  the 
particular  trusts  which  I  have  enumerated  as  belonging  to  the  second 
class,  I  cannot  find  that  any  of  them  depend  upon  secret  alliance 
with  the  transporter.  If,  however,  any  of  them  do,  such  as  do  would 
of  course  fall  under  the  first  classification. 

*  Mr.  A.  J.  Cassatt,  third  vice-president  of  the  Pennsylvania  Rail- 
road, as  a  witness  in  the  case  of  The  Commonwealth  vs.  The  Penn- 
sylvania Railroad  et  al.,  before  the  Master  appointed  by  the  Supreme 
Court  of  Pennsylvania,  in  1879  (see  printed  testimony  in  this  case,  pp. 
661—737),  testified,  that  rebates  were  given  by  the  Pennsylvania 
Railroad  and  its  connections  to  the  Standard  Oil  Company  (which  is 
identical  with  what  is  now  known  as  the  Standard  Oil  Trust),  varying 
from  4g}4  cents  to  64^  cents  per  barrel  of  crude  petroleum,  for  ship- 
ments from  the  oil  regions  to  the  seaboard,  the  difference  in  the 
amount  of  rebate  being  due  to  the  difference  in  the  points  of  shipment 
and  destination  ;  that  the  Pennsylvania  Railroad  began  paying  these 
rebates  in  February,  1878,  and  was  still  paying  them  at  the  time  Mr. 
Cassatt's  testimony  was  given  (March,  1879).  Mr.  Cassatt  also 
testified  that  an  additional  rebate  of  22  ^£  cents  per  barrel  has  been 
regularly  paid  to  the  American  Transfer  Company,  one  of  the  compa- 
nies belonging  to  the  Standard  Oil  Company,  as  a  "commission," 


THE  TRANSPORTATION  PROBLEM.  15 

to  create,  in  twenty  years,  a  money  capital  of 
something  over  a  hundred  million  dollars.  It 
will  readily  be  seen  that  this  power  of  itself, 
with  but  a  small  investment  in  money,  was 
ample  for  the  purpose  of  its  creation.  And  if 
in  addition  there  was  another  bond  between  the 
organizers  of  the  trust  and  the  managers  of  the 
several  trunk  lines,  for  secret  participation  by 
these  managers  for  their  individual  benefit  in 
the  revenues  of  this  trust,  it  is  easy  to  see  how 
the  compact  between  these  railway  managers 
and  the  trust  is  assured  in  that  security  which 
comes  from  secrecy.  Here  then  the  trust  con- 
stitutes a  complete  organization  for  suppressing 
competition  through  the  control  of,  and  partici- 
pation in,  the  transportation.  It  is  an  organiza- 

and  that  this  sum  was  paid  to  the  Standard  Oil  Company  not  only 
upon  shipments  made  by  the  Standard  Oil  Company,  but  upon  all 
shipments  of  petroleum  made  by  any  shipper.  Mr.  Cassatt,  as  a 
witness,  also  expressed  the  belief  that  the  other  trunk  lines  paid  to 
the  Standard  Oil  Company  the  same  rebates  and  "  commissions." 

When  we  consider  that  the  shipments  of  crude  oil  from  the  oil 
regions  to  the  seaboard  for  the  year  1878  averaged  something  more 
than  20,000  barrels  per  day  in  crude  equivalent  (see  testimony  of 
Samuel  F.  Stowell,  pp.  124-251),  and  that  of  this  the  Standard  Oil 
Company  shipped  at  least  80  per  cent.,  or  16,000  barrels  per  day,  we 
may  infer  that  if  upon  these  shipments  that  company  received  even  72 
cents  per  barrel  in  rebate  and  "commission,"  the  total  sum  thus 
received  from  the  trunk  lines  daily  would  be  $11,520,  or,  for  the  year, 
estimating  it  at  300  days,  $3,456,000.  This  sum,  of  course,  does  not 
include  any  rebates  paid  by  any  other  than  the  trunk  lines  to  the  sea- 
board, and,  therefore,  does  not  indicate  any  rebates  which  may  have 
been  received  by  the  Standard  Oil  Company  from  any  of  the  Western 
or  Southern  roads. 


1 6  RAILWAY  SECRECY. 

tion  which  enables  its  managers  to  exert  an 
immense  control  over  both  production  and  con- 
sumption by  artificial  means,  and  thus  to  take 
to  itself  an  immense  margin  of  profit.  Under 
these  circumstances  the  delusion  in  the  idea 
that  the  Standard  Oil  Trust  is  entitled  to 
approval  because  of  the  cheapening  of  the 
product  in  which  it  deals,  ought  to  be  quite 
apparent.  While  it  is  undoubtedly  true  that 
oil  has  gradually  and  persistently  become 
cheaper  within  the  past  twenty  years,  it  must 
be  obvious  that  this  cannot  be  due  to  a  secret 
process  which  the  Standard  established  for  the 
purpose  of  exacting  the  largest  possible  margin 
between  the  producer  and  the  consumer.  It 
cannot  be  one  of  the  motives  of  a  trust  to 
cheapen,  where  its  sole  reason  for  being  is  to 
exact  an  artificial  margin  of  profit.  The  process 
by  which  the  Standard  Oil  Trust  has  accumu- 
lated over  a  hundred  million  dollars  within 
twenty  years,  with  little  or  no  capital  to  start 
with,  has  been  one  which  tended  altogether 
toward  preventing  cheapening.  If  this  monop- 
oly had  been  absolute,  and  competition  had 
been  entirely  annihilated,  there  would  have 
been  but  little  reduction  in  the  price  of  oil ;  the 
essential  motive  of  aggrandizement  which 
inheres  in  this  trust  would  have  effectually  pre- 
vented it.  Prices  have  fallen  then,  not  by  any 


THE  TRANSPORTATION  PROBLEM.  \J 

act  of  grace  of  the  Standard  Oil  Trust,  but 
through  competition,  which,  with  all  its  power, 
that  trust  could  not  entirely  destroy.  The 
competition  which  existed  in  the  producing 
field,  the  competition  which  existed  in  Russian 
oil-fields,  and  the  competition  which  was  ex- 
erted by  the  few  independent  refiners  who 
persisted  notwithstanding  the  heavy  odds  against 
them;  these  have  been  the  forces  that  have 
accomplished  the  cheapening.  It  has  followed 
just  as  lower  rates  in  railway  transportation  and 
lower  prices  in  the  iron  and  steel  industry  were 
brought  about — not  by  the  wishes  of  those  who 
made  artificial  discriminations,  or  restrictions, 
nor,  indeed,  by  the  wish  of  any  of  the  com- 
petitors themselves ;  but  under,  and  by  force  of, 
a  law  which  operates  whenever  its  operation  is 
not  interfered  with.  Wherever  the  margin  of 
profit  appeared,  there,  notwithstanding  all  dis- 
advantage of  discrimination  and  restraint,  compe- 
tition asserted  itself,  and  its  inevitable  effect 
was  to  cheapen.  It  will  be  seen,  then,  that 
from  the  very  nature  of  things,  monopolies 
never  seek  to  reduce  prices.  Their  main  work 
is  devising  means  to  prevent  it.  They  can 
never  be  beneficent.  The  very  statement  that  a 
monopoly,  which  secretly  tries  to  kill  off  com- 
petitors with  the  obvious  purpose  of  compelling 
the  consumer  to  contribute  to  its  gains,  can  lay 


1 8  RAIL  W 'AY  SECRECY. 

claim  to  the  credit  of  promoting  cheapness, 
seems  little  less  than  grotesque.  When  monop- 
olies become  altruistic,  these  efforts  at  cheapen- 
ing may  be  looked  for,  but  not  before.  With 
like  reason  it  may  be  said  that,  where  it  is 
assumed  by  monopoly  that  it  tends  to  increase 
skill,  there  is  a  similar  delusion.  Skill  is  created 
and  stimulated  by  competition.  Wherever  mo- 
nopoly is  dominant,  the  incentive  for  improve- 
ment is  deadened.  It  is  only  when  competitors 
contend  with  each  other  for  the  favor  of  the 
consumer  that  they  are  stimulated  to  attract 
that  consumer  by  presenting  him  with  wares 
both  skilfully  and  cheaply  made. 

Overlooking  for  a  moment  the  question  of  the 
means  by  which  the  Standard  Oil  Trust  ac- 
quired its  immense  capital,  and  assuming  this 
capital  to  have  consisted  of  an  actual  invest- 
ment of  money,  let  us  seek  to  ascertain  the 
essential  vice  of  the  organization.  The  posses- 
sion of  large  capital,  where  it  is  properly 
acquired,  signifies  no  iniquity.  Where  the  con- 
ditions of  success  are  just  and  equal,  there  such 
.success,  and  accumulation  resulting  from  such 
success,  only  indicates  a  pre-eminence  of  skill, 
'sagacity,  and  honesty  in  him  who  has  attained  it. 
There  are  numerous  instances  in  which  large 
accumulations  have  been  so  made.  They  add  to 
the  nation's  wealth.  They  indicate  its  well- 


THE  TRANSPORTATION  PROBLEM.  19 

being.  If  one  man  excels  in  a  race  where  all  is 
fair,  it  is  because  he  has  those  qualities  of  physi- 
cal vigor  and  fleetness  which  properly  entitle 
him  to  the  victory.  Nor  is  there  any  necessary 
danger  to  the  common  industrial  right  in  the 
fact  that  the  possessors  of  accumulated  wealth 
have  their  accumulations  invested  in  corpora- 
tions. Corporations  may  be  conceded  to  be 
convenient  for  conducting  large  enterprises  ;  at 
any  rate  it  is  certain  that  if  they  are  conducted 
in  accordance  with  industrial  right,  they  will 
produce  wholesome  industrial  growth.  Nor  is 
there  necessarily  any  danger  in  the  mere  fact  that 
a  number  of  such  corporations  are  held  in  unity 
of  possession.  If  the  methods  in  the  use  of 
capital,  or  the  methods  by  which  the  corporate 
structure  is  managed,  are  legitimate,  and  do  not 
infringe  the  equal  industrial  right,  they  are  not 
evils.1  To  take  a  particular  instance  :  if  the 

.  ]  I  have  lately  seen  two  essays  upon  the  uses  of  rich  men.  In  one 
of  these,  rich  men  were  set  forth  as  unmitigated  political  evils,  and  in 
the  other  they  were  treated  as  blessings  to  civilization.  In  neither, 
however,  was  any  account  taken  of  the  means  by  which  the  wealth 
was  acquired.  It  seems  to  me  it  ought  to  be  plain  that  it  is  not  the 
simple  possession  of  riches  that  constitutes  either  a  threat  to  our  insti- 
tutions or  a  furtherance  of  them.  What  we  need  to  look  at  first  of 
all,  is  the  methods  by  which  fortunes  are  acquired.  The  influence  of 
men  who  acquire  fortunes,  is  very  likely  to  be  exerted  in  the  direction 
of  the  methods  by  which  those  fortunes  are  made.  The  statesman  who 
has  made  a  vast  accumulation  through  railway  plunder,  and  afterwards 
has  secured  public  office  by  reason  of  his  money  success,  is  not  likely 
to  be  either  a  sound  economist  or  an  elevated  moralist.  He  is  not 


20  RAILWAY  SECRECY. 

Standard  Oil  Trust  were  merely  an  aggregation 
of  coq^orations  following  the  plain  business  of 
refining  and  marketing  oil  in  open  competition 
with  other  refiners ;  if  the  advantage  of  having 
larger  capital  than  its  competitors  were  its  only 
advantage, — that  is  to  say,  if  these  competitors 
had  the  equal  industrial  rights  to  which  all 
industries  without  respect  to  the  volume  of 
capital  are  entitled ;  and,  especially,  if  these  com- 
petitors had  equal  facilities  for  reaching  the 
consumer  through  a  common  means  of  transpor- 
tation, then  these  competitors  would  receive  no 
injury  to  their  business  that  they  could  com- 
plain of  ;  nor  would  they  be  likely  to  complain. 
Certainly  the  evil  of  the  Standard  Oil  Trust 
does  not  consist  either  in  its  name  or  in  its 
formal  structure  as  a  trust.  Although  in  a 
condition  of  freedom  these  would  probably  not 
exist  as  they  are,  we  may,  nevertheless,  concede 
that  they  may  be  allowable  modes  of  conducting 

likely  to  abandon  the  habits  and  modes  of  thought  and  action  through 
which  he  made  his  money.  He  will  rather  cherish  these.  Therefore  he 
will  not  be  one  whose  example  will  be  wholesome  to  the  rising  gener- 
ation. On  the  other  hand,  a  man  in  industrial  pursuits,  who  has 
made  his  fortune  by  the  exercise  of  legitimate  skill,  prudence,  and 
sagacity,  will  probably  be  found  to  be  a  good  economist  as  well  as  a 
man  of  moral  quality,  and  his  example  and  influence  will  be  likely  to 
be  altogether  wholesome.  Whilst  there  may  be  exceptions,  then,  it 
may  be  set  down  as  a  rule,  that  rich  men  who  have  pursued  wholesome 
means  in  getting  their  wealth  will  have  a  wholesome  influence  ;  and 
rich  men  who  have  pursued  unwholesome  methods  in  getting  their 
wealth  will  have  an  unwholesome  influence. 


THE  TRANSPORTATION  PROBLEM.  21 

an  organization  for  large  enterprise.  We  may 
conclude  generally  that  wherever  an  enterprise, 
whether  corporate  or  individual,  is  conducted 
under  the  law  of  industrial  equality;  where 
those  who  manage  it  cannot  employ  secret  arti- 
fices to  prevent  their  competitors  from  reaching 
the  consumer  and  pursuing  the  same  business 
upon  equal  industrial  terms, — there  the  form  or 
the  name  of  the  organization  is  of  but  little 
significance. 

These  exterior  considerations  eliminated,  we. 
shall  find  the  whole  vice  of  this  trust  to  consist 
in  the  fact  that  its  secret  relations  with  the 
transporter  enable  it  to  block  the  way  of  its 
competitors  in  their  efforts  to  reach  the  con- 
sumer ;  and  not  only  to  do  this  in  occasional 
instances,  but  to  do  it  systematically  and  con- 
tinuously. I  have  said  that  if  one  man  excels  in 
a  race  where  all  is  fair,  it  is  because  he  has  those 
qualities  of  physical  vigor  and  fleetness  which 
properly  entitle  him  to  the  victory ;  but  it  must 
be  seen  that  if  he  has  gained  the  goal  by  secretly 
maiming  or  drugging  his  competitor,  he  demon- 
strates nothing  but  his  superiority  in  craft  and 
cunning.  Notwithstanding  the  latest  efforts  of 
the  Interstate  Commerce  Commission  to  pre- 
serve equal  right  to  competitors,  the  Standard 
Oil  Trust  is  now  effectually  obstructing  refiners 
of  Pittsburg  and  the  interior  in  their  efforts 


22  RAILWAY  SECRECY. 

to  get  to  the  seaboard  to  reach  the  consumer.1 
Under  these  circumstances  it  must  be  plain  that 
the  Standard  Oil  Trust  may  abandon  its  name 
and  its  structure,  as  the  Cotton-seed  Oil  Trust 
is  doing  or  has  done,  or  it  may  take  to  itself 
other  protean  shapes.  All  this  will  not  of  itself 
change  its  character  or  its  method,  or  lessen  its 
influence  in  obstructing  its  competitors'  right  of 
way  to  the  points  of  consumption. 

I  have  assumed,  for  the  moment,  for  the  sake 
of  illustration,  that  the  capital  of  the  Standard 
Oil  Trust  was  not  acquired  by  secret  abstrac- 
tion, but  by  actual  investment ;  this,  however, 
as  I  have  heretofore  shown,  is  not  the  case. 
That  particular  and  enormous  capital  could  not 
have  been  acquired  by  one  company  or  organi- 
zation through  legitimate  refining.  Nothing 

1  Besides  the  secret  aid  derived  from  the  railways,  the  Standard  Oil 
Trust  has  another  element  of  illicit  strength  which  has  not  yet  been 
touched  by  Interstate  Commerce  legislation.  This  trust  is  the  sole 
owner  of  several  quasi-public  corporations — pipe-lines  for  transporting 
oil  from  the  wells  in  the  oil  region  to  the  seaboard.  Whilst  these 
pipe-lines  are  essentially  common  carriers,  they  carry  no  oil  except  for 
corporations  or  firms  belonging  to  the  trust.  Against  an  evil  such  as 
this  even  the  Russian  government  has  provided.  The  joint  Coun- 
cil of  the  Ministries  of  Finance  and  State  Domain,  in  setting  forth  the 
conditions  upon  which  a  concession  would  be  granted  by  the  Russian 
government  for  the  construction  of  a  pipe-line  from  Baku  to  Batoum, 
demand,  among  other  things,  that  the  pipe-line  shall  serve  the  public 
as  a  means  of  transportation,  and  that  the  owners  of  the  pipe-line 
shall  not  be  permitted  to  engage  in  the  business  of  producing,  refining, 
or  trading  in  petroleum  products. —  The  Monthly  Petroleum  Age,  for 
April,  1887,  Bradford,  Pa. 


THE  TRANSPORTATION  PROBLEM.  2$ 

less  than  the  secret  control  of  transportation,  the 
participation  in  that  transportation,  and  the 
suppression  of  competition  could  have  brought 
about  such  an  aggregation  under  one  ownership. 
Yet  this  immense  capital  is  not,  of  itself,  as  I 
have  said,  the  evil.  Great  as  this  accumulation 
is,  it  would  not  even  now  be  sufficient  to  pre- 
vent the  growth  of  independent  refining  indus- 
tries and  their  natural  diffusion,  if  secret  bar- 
gains with  the  railways  were  prevented ;  for 
competition  is  a  persistent  factor  in  trade — a 
persistent  law  of  nature, — and  the  normal  ad- 
vantages of  volume  of  capital  will  never  annihi- 
late it.  Whenever  the  advantages  of  ownership 
are  as  secure  to  the  smaller  holder  as  to  the 
larger,  and  industrial  rights  are  preserved  in 
equality,  such  competition  will  invariably  arise. 
Where  an  independent  refiner  with  a  small  cap- 
ital can  be  assured  of  this  security,  he  will  come 
to  share  the  trade,  and  the  business  will  move 
towards  diffusion  of  ownership,  and  the  power 
which  will  confer  supremacy  will  not  be  mag- 
nitude of  capital.  It  will  be  the  ability,  through 
skill  born  of  competition,  to  make  and  to  con- 
tinue to  make  the  product,  and  to  deliver  it  to 
the  consumer  in  open  field,  at  less  price  than  it 
can  be  furnished  by  any  other  competitor. 

What  I  have  said  of  the  Standard  Oil  Trust 
may  be  said  with  equal  truth  of  the  Cotton- 


24  RAIL  WA  Y  SECKECY. 

seed  Oil  Trust  and  the  Cattle  Trust.  It  is  not 
by  reason  of  their  forms  or  their  names  that  they 
accomplish  the  mischief.  It  is  their  hidden  re- 
lations with  transportation  which  is  doing  this 
mischief.  Extract  the  power  which  these  rela- 
tions confer,  and  the  form,  the  name,  and  the 
magnitude  will  not  be  dangerous.  On  the 
other  hand,  so  long  as  these  organizations, 
under  whatever  name  or  formal  appearance  they 
may  exist,  can  maintain  secret  relations  with  the 
railway  officials,  so  long  will  their  vices  con- 
tinue. During  the  past  summer,  a  senatorial 
committee,  of  which  Senator  Vest  was  the  chair- 
man, undertook  to  investigate  the  secrets  of  the 
Cattle  Trust.  This  committee  was  clothed  with 
all  the  authority  which  the  Senate  could  confer 
upon  it.  What  did  it  find  ?  I  cannot  state 
with  positiveness  the  result  of  its  efforts,  for  the 
committee  has  not  yet  made  its  report,  but,  from 
the  public  statements  which  have  been  made  of 
its  progress,  it  appears  that  the  members  ex- 
hausted the  limits  of  their  authority  without 
reaching  any  secrets.  It  is  not  unlikely  that, 
as  the  efforts  of  this  committee  were  directed 
to  investigate  the  trust,  instead  of  the  quasi- 
public  railway,  there  were  some  valid  legal 
objections  in  the  way  of  its  investigation.  The 
effort  at  senatorial  inspection  might  more  appro- 
priately have  been  made  by  investigating  the 


THE  TRANSPORTATION  PROBLEM.  2$ 

management  of  those  railways  which  are  fur- 
nishing the  secret  advantages  to  this  trust ;  but 
even  had  this  been  tried,  it  is  probable  that  the 
inquest  would  have  been  insufficient,  since  it 
may  be  set  down  as  certain  that  a  well-organ- 
ized and  systematic  plan  of  secrecy  can  only  be 
exposed  by  a  well-organized  and  systematic 
power  of  inspection  ;  that,  indeed,  the  power  to 
investigate  must  be  more  far-reaching  than  the 
power  to  conceal ;  and  such  a  degree  of  power 
the  committee  did  not  have. 

I  will  now  briefly  examine  the  second  class  of 
trusts  named  at  the  beginning,  in  order  to  mark 
the  contrast  between  them  and  those  just  dis- 
cussed, and  to  show  more  precisely  that  it  is  the 
relation  of  the  trusts  to  the  railways  that  pro- 
duces the  grave  evils.  This  class  embraces 
those  trusts  which  do  not  depend  upon  railway 
alliance,  but  which  aim  by  combination  to  gain 
the  entire  possession  and  control  of  any  particu- 
lar product  with  the  view  of  repressing  produc- 
tion, and  thus  making  the  margin  of  profit  larger. 

The  broad  distinction  between  the  trusts  of 
the  first  and  second  class  is,  I  think,  easily 
perceived.  That  which  is  common  to  both  is 
the  disposition  to  obstruct  or  overcome  normal 
competition.  The  essential  difference  between 
them  consists  in  the  different  kind  of  power 
which  each  has  for  accomplishing  this  end  and 


26  RAILWAY  SECRECY. 

for  persisting  in  such  accomplishment ;  and  this 
difference  is  found  in  the  fact  that  whilst  the 
trusts  of  the  first  class  control  the  avenues  from 
producer  to  consumer,  through  secret  alliances 
with  the  railways,  those  of  the  second  class  do 
not. 

The  industries  which  a  trust  of  the  second 
class  aims  to  appropriate  are  usually  conducted 
at  many  separate  places.  While  a  trust  of  this 
class  may  succeed  in  taking  control  of  such  an 
industry,  yet  having  no  such  secret  relations 
with  the  transporter  as  enables  it  to  prevent  any 
competitor  that  may  arise  from  reaching  the 
consumer,  it  has  but  a  temporary  power  for  ex- 
clusion. I  do  not  mean  to  imply  that  a  trust 
of  the  second  class,  moved  by  the  motives  which 
I  have  indicated,  is  not  mischievous.  It  undoubt- 
edly is  so,  just  as  "  corners  "  and  market  manip- 
ulations are  mischievous.  Its  organizers  may 
suddenly  buy  up  and  absorb  all  competition, 
and  thus  for  a  time  hold  exclusive  sway  and 
make  large  gains  ;  and  by  making  the  prices 
exorbitant  it  may  in  this  way  oppress  the  pub- 
lic. But  there  cannot  be  any  permanency  to  its 
power  so  long  as  the  way  from  producer  to  con- 
sumer is  kept  open  to  all  alike  :  for  whenever  a 
large  perceptible  margin  of  profit  appears  in 
any  industry,  it  immediately,  of  itself,  invites 
and  encourages  competitors  to  share  that  margin. 


THE  TRANSPORTATION  PROBLEM.  2/ 

The  competition  will  always  appear  wherever 
producers  can  reach  consumers  on  equal  terms, 
and  such  competition  will  finally  defeat  the  ar- 
tificial combination. 

A  trust  of  the  first  class,  such  as  the  Stand- 
ard Oil  Trust,  meets  and  deals  with  opposition 
from  competitors  in  a  very  different  manner 
from  that  which  any  trust  of  the  second  class 
can  employ.  It  has  characteristics  which  make 
it  more  of  a  militant  than  an  industrial  enter- 
prise. It  deals  in  products  which  are  trans- 
ported in  large  bulk.  The  amount  and  value 
of  transportation  are  of  greater  importance  to 
it  than  is  the  value  of  the  products  in  which  it 
deals ;  for  the  illicit  employment  of  freight  val- 
ues constitutes  its  chief  power  in  its  warfare 
and  its  chief  source  of  profit.  It  is  thus  enabled 
to  derive  its  very  ammunition  and  supplies  from 
its  enemies,  the  competitors.  In  the  secret 
processes  of  weakening  them,  it  may  extract 
sufiicienfc  money  in  freight  rebates  and  discrim- 
inations to  enable  it  to  buy  their  whole 
business  when  they  are  thus  weakened.  It 
thus  weakens  its  competitors  without  exhaust- 
ing itself.  But  a  trust  of  the  second  class  hav- 
ing no  such  railway  alliance  has  no  such  power. 
When  it  institutes  abnormal,  in  order  to  defeat 
normal,  competition,  it  is  constantly  weakened 
through  the  losses  of  that  competition,  since 


28  RAILWAY  SECRECY. 

these  losses  fall  upon  the  trust  just  as  they  do 
upon  the  competitors ;  and  if  this  trust  proceeds 
thereafter  to  absorb  these  competitors,  it  be- 
comes by  such  absorption  surcharged  with  new 
burdens  of  unnecessary  plant.  Nor  does  such 
absorption  prevent  a  recurrence  of  competition. 
Those  trusts  of  the  second  class  which  seek 
to  control  industries  having  a  tariff  protection, 
form  no  exception  to  the  rule.  A  trust  which 
is  called  into  being  by  such  tariff  protection 
will  doubtless  serve  to  illustrate  the  solecism  of 
a  high  protective  tariff.  It  does  this  from  the 
fact  that  its  office  is  to  interfere  with  the  stimu- 
lus and  growth  of  the  manufacture  which  the 
government  tariff  is  intended  to  encourage. 
Such  trusts  as  the  Salt  Trust  and  the  Sugar 
Trust  deliberately  aim  to  suppress  the  growth 
of  the  manufacture  in  which  they  deal  by  cur- 
tailing its  production,  and  they  aim  to  do  this 
solely  in  order  that  they  may  appropriate  to 
themselves  the  largest  part  of  the  bounty  which 
the  government  has  given  presumably  for  the 
very  opposite  purpose,  viz.,  to  encourage  the 
growth.  But  it  must  be  obvious  that  such  a 
trust,  lacking  as  it  does  the  power  which  is  con- 
ferred by  secret  alliance  with  the  railways,  to 
obstruct  the  w^ay  from  producer  to  consumer, 
cannot  continuously  prevent  outside  competi- 
tion from  contesting  its  profits — at  least  within 


THE  TRANSPORTATION  PROBLEM.  29 

the  limits  of  our  own  country.  Such  trusts, 
then,  necessarily  cannot  have  the  permanency 
which  characterizes  those  of  the  first  class. 
Their  effect,  in  the  long  run,  will  be  to  enlarge 
competition  and  thus  to  defeat  themselves. 

The  extent  to  which  a  trust  of  the  second 
class  may  hold  excessive  profit  is  limited  in  du- 
ration by  the  time  it  will  take  for  the  men 
skilled  in  the  art — that  is,  men  who  are  thrown 
out  of  employment  by  the  artificial  lessening  of 
production — to  organize  capital  and  start  a  new 
enterprise,  in  order  that  they  may  compete  for 
these  profits.  For  the  principle  of  competition, 
as  formulated  by  Adam  Smith,  is,  "that  profits 
in  any  business  cannot  permanently  remain 
above  the  general  rate  of  profits,  for  the  reason 
that  the  influx  of  new  capital  into  the  excep- 
tionally profitable  business  will  be  sure  pres- 
ently to  reduce  it  to  the  normal  condition."  We 
have  had  numerous  examples  of  this  in  our  cur- 
rent industries  within  the  past  twenty  years. 
The  Bessemer  steel  business  is  a  conspicuous  one. 
When  the  profits  in  the  business,  through  the 
tariff,  were  exceptionally  large,  and  there  was 
an  unusually  large  surplus  of  money  seeking 
investment,  this  attracted  so  many  competitors 
that  the  whole  volume  of  profit,  including  the 
bounty  of  the  government,  gradually  fell,  in 
the  interest  of  the  consumer,  to  a  point  where 


30  RAIL  WA  Y  SECRECY. 

for  a  long  time  but  little  profit  to  the  manufac- 
turer was  left.  This  took  place  notwithstand- 
ing the  fact  that  during  its  progress  a  combina- 
tion was  formed  to  limit  production  in  order  to 
keep  up  the  profits. 

There  is  no  disposition  so  common  as  that  of 
seeking,  wherever  profits  appear,  to  share  them. 
This  in  industry  is  competition.  It  always 
occurs  by  the  working  of  a  natural  law  which, 
in  a  free  field,  tends  to  develop  the  highest  skill 
in  manufacture,  and  thus  to  produce  the  greatest 
cheapness  and  the  largest  diffusion  of  the  prod- 
uct for  man's  benefit.  This  emulation  is  so 
active  and  constant  that  it  will  arise  and  con- 
tend for  perceptible  profits,  even  when  the  odds 
are  greatly  against  it.  It  has  done  so  in  the  oil 
business,  even  at  times  when  sure  bankruptcy 
stared  the  competitor  in  the  face.  In  a  free 
field  it  does  so  until  profits  are  reduced  to  a 
minimum,  and  it  is  thus  that  the  otherwise  un- 
guarded consumer  at  last  gets  the  best  product 
of  which  skill  is  capable  at  the  lowest  price.  It 
will  be  observed  that  the  motives  of  the  pro- 
ducers do  not  spring  from  a  solicitude  for  the 
consumer.  Nevertheless,  free  competition  inevi- 
tably works  for  his  benefit ;  it  is  by  economic 
law,  and  not  by  the  producer's  wishes,  that  the 
consumer  is  protected.1  It  is  to  this  law  of 

1  Indeed  it  is  the  case  that  the  very  men  who  are  most  active  in 
promoting  combination  are  sometimes,  as  consumers,  the  most  apt  to 


THE  TRANSPORTATION  PROBLEM.  31 

competition,  working  its  way  in  spite  of  the 
efforts  of  the  producer  to  obstruct  it,  in  spite  of 
combination,  in  spite  of  theorists,  and  in  spite 
of  all  the  factitious  obstacles  that  from  time  to 
time  have  been  thrown  in  its  way,  that  we  owe 
the  ever  increasing  development  of  industry, 
its  widening,  its  efficiency,  its  volume,  and  the 
perfection  of  its  processes.  I  think  I  may  say, 
without  the  least  exaggeration,  that  it  is  upon 
the  operation  of  this  law,  more  than  any  other 
one  law,  that  our  modern  civilization  depends. 
The  only  goal  at  which  this  competition  finally 
stops,  when  the  field  is  kept  free,  is  where  one 
competitor  among  all,  by  means  of  superior 
skill  and  natural  advantage,  is  able  to  furnish 
and  to  continue  to  furnish  his  products  to  the 
public  at  the  least  cost  and  in  the  largest  volume. 
"With  trusts  of  the  second  class  the  vices  are 
functional.  Under  other  names  these  industrial 
evils  have  existed  before.  They  arise  when  the 
public  economic  sense  becomes  blunted,  they 
flourish  when  this  sense  is  temporarily  over- 
contradict  their  own  theory.  A  "  walking  delegate  "  of  the  Knights 
of  Labor  may  pass  through  a  large  shoe  factory,  and  by  raising  his 
hand  produce  a  strike  among  the  employes.  If  he  thus  brings  about 
a  higher  price  for  the  product  of  this  factory,  and  afterwards  comes  to 
need  shoes  for  himself  or  his  family,  he  will  be  very  likely  not  to  go 
where  the  price  has  been  raised,  but  to  seek  a  place  where  competition, 
which  has  not  been  interfered  with,  has  made  shoes  cheaper  ;  since, 
with  all  his  fancied  superiority  to  natural  law,  the  instinct  of  the  con- 
sumer comes  uppermost,  and  he  will  not  pay  a  dollar  for  that  which 
he  can  get  for  fifty  cents. 


32  £  AIL  WAY  SECRECY. 

thrown,  and  they  subside  when  economic  law 
by  its  own  persistence  illustrates  the  fallacy  of 
such  devices.  Like  the  "South  Sea  Bubble," 
the  "Tulip  Craze,"  and  what  is  known  in  his- 
tory as  the  "  Mississippi  Bubble,"  they  are 
instances  of  the  recurrence  and  prevalence  of 
delusion. 

It  may  be  set  down  as  a  safe  rule  that  resort 
to  specific  legislation  for  the  cure  of  the  func- 
tional evils  which  disturb  industry  is  inadvisa- 
ble. The  Common  Law  contains  ample  protec- 
tion against  such  evils,  and  the  courts  are  clothed 
with  ample  power  to  deal  with  them.  Besides, 
as  I  have  heretofore  said,  under  the  persistence 
of  economic  law,  they  tend  to  their  own  de- 
struction. There  is  also  another  objection  to  a 
too  ready  resort  to  specific  legislation  in  such 
matters.  Such  legislation  may  itself  interfere 
with  economic  law,  and  when  it  does,  it  is  more 
apt  to  mar  than  to  mend.  Thus,  legislation  with 
reference  to  speculative  "  corners,"  wherever 
attempted,  has  usually  interfered  with  the  free- 
dom of  legitimate  barter ;  while  at  the  same 
time  it  has  not  usually  been  effective  in  pre- 
venting the  mischief  aimed  at.  A  period  of 
abnormal  speculation  is  often  an  indirect  prod- 
uct of  legislative  interference  writh  economic 
law,  and  the  practical  object-lessons  taught  by 
such  violations  of  economic  law  will  of  them- 


THE  TRANSPORTATION  PROBLEM.  33 

selves  more  effectually,  at  last,  cure  the  evils  of 
such  speculation,  than  will  additional  legislative 
interference.1  If  the  public  invests  in  the  certifi- 
cates of  a  trust,  the  managers  of  which  depend 
for  their  success  upon  market  manipulation,  and 
if  the  public  comes  to  find  that  whilst  the  mana- 
gers have  secured  only  temporary  success — that 
their  continued  efforts  are  followed  by  final 
and  inevitable  disaster  through  the  persistence 
of  economic  law, — then  this  duped  public 
will  learn  at  length  not  to  invest  in  these 
certificates. 

But  the  case  is  altogether  different  where  the 
organization  which  does  the  mischief  is  one 
upon  which  the  State  has  conferred  franchises 
which  enable  those  in  control  of  it  to  usurp  the 
very  sovereignty  of  the  State  itself.  Where  the 
managers  of  quasi-public  corporations,  such  as 
railways,  relying  upon  power  received  from  the 
State,  actuated  by  motives  of  private  gain,  and 

1  An  engrosser,  regrater,  or  forestaller,  is  a  person  described  in  law 
as  one  who  purchases  articles  of  food  with  the  intention  of  selling 
them  again  at  an  enhanced  price  in  some  open  market ;  or  as  one  who 
contracts  for  farm  products -while  these  products  are  still  in  the  field. 
These  practices  in  England  were  treated  as  criminal,  and  a  number  of 
statutes  from  Edward  VI.  to  Queen  Anne  were  passed  for  punishing 
those  who  engaged  in  them.  When  the  laws  which  regulate  trade  came 
to  be  better  understood,  it  was  found  that  such  restraint  laid  upon  deal- 
ing, by  preventing  free  trade  in  the  commodities,  had  a  tendency  to  dis- 
courage all  trade,  and  to  raise,  rather  than  to  lower,  prices.  Instead 
of  curing,  they  aggravated  the  evil  aimed  at.  The  penal  statutes  were 
thereupon  repealed  by  Statute  7  and  8  Viet.  c.  24. 

3 


34  RAILWAY  SECRECY. 

operating  in  secret,  make  alliances  with  one 
class  of  citizens,  or  with  other  corporations,  to 
obstruct  and  defeat  the  industrial  right  of  other 
classes  of  citizens,  something  more  than  the 
usual  remedial  resorts  becomes  necessary. 
Trusts,  such  as  those  of  the  first  class,  based 
upon  illicit  bargains  made  with  railway  mana- 
gers, do  not  depend  upon  public  confidence  for 
support,  nor  are  they  injured  when  the  con- 
fidence of  the  investor  is  withdrawn  from  them. 
Even  when  organized  on  so  great  a  scale  as  is 
the  Standard  Oil  Trust,  they  do  not  acquire 
their  capital  through  public  subscription,  but 
derive  both  it  and  the  effectiveness  of  their 
means  from  the  power  of  the  transporter  for 
secret  abstraction,  obstruction,  and  appropria- 
tion. There  is  in  these  alliances  a  continuous 
and  insidious  power  for  evil,  which  is  in  direct 
contrast  with  that  ephemeral  power  possessed 
by  the  trusts  of  the  second  class.  The  former 
do  not  contain  in  themselves  the  elements  of 
their  own  destruction.  Their  power  is  lasting  ; 
it  is  exerted  in  secret ;  and  it  is  derived  from 
relations  with  those  who  hold  franchises  from 
the  State,  the  illicit  use  of  which  enables  them 
to  trench  upon  individual  right.  Here  is  an 
industrial  condition  not  contemplated  by  the 
Common  Law,  and  one  for  which  the  Common 
Law  does  not  provide  an  adequate  remedy ;  nor 


THE  TRANSPORTATION  PROBLEM.  35 

is  it  one  which  the  courts  can  correct  by  dealing 
with  specific  and  separate  instances  of  the  evil. 
If  it  is  the  duty  of  the  State  to  protect  its 
sovereignty  from  invasion,  it  must  necessarily 
control  all  devices  which  tend  to  interfere  with 
that  sovereignty.  Such  control  cannot  possibly 
be  accomplished  except  through  organized  State 
action.  I  take  these  facts  as  constituting  the 
reason  for  being  of  the  Interstate  Commerce 
Commission  and  for  railway  legislation. 


CHAPTEK  II. 

EXISTING    RAILWAY     MANAGEMENT. 

Mr.  Charles  Francis  Adams'  Statement  of  the  Case — Evasions  of  the 
Interstate  Commerce  Law — The  Systematic  Character  of  Rail- 
way Secrecy — Corporate  Secrecy  and  Individual  Privacy — The 
Opportunity  in  Railway  Secrecy  for  Unlawful  Discriminations — 
The  Failure  of  Honest  Management  under  Existing  Conditions 
— The  Reasoning  of  the  Railway  Managers  in  Justification  of 
Present  Methods — Its  Effect  upon  Business  Morals — The  Origin 
and  Evolution  of  the  Existing  Status — The  Impossibility  of  Re- 
forming the  Inherent  Evil  of  Railway  Management  by  those  in 
Control  of  the  Railways. 

WHAT  I  have  set  forth  as  the  more  perma- 
nent and  dangerous  qualities  in  trusts  of  the 
first  class,  is  intended  to  illustrate  the  last  and 
greatest  evil  emanating  from  railway  secrecy ; 
but  other  evils  which  existed  in  railway  man- 
agement before  these  trust  schemes  came  into 
being,  still  exist  and  grow,  and  of  these  it  is 
necessary  briefly  to  speak. 

Mr.  Charles  Francis  Adams,  in  one  of  his 
latest  utterances,  uses  concerning  these  evils  lan- 
guage very  much  stronger  than  I  as  an  outside 
observer  would  choose  to  employ.  He  says : 

36 


E XI S  TING  RA IL  WA  Y  MA  NA  GEM  EN  T.  37 

u  The  dishonest  methods  of  rate  cutting,  the 
secret  systems  of  rebates,  the  indirect  and  hid- 
den payments  made  to  influence  the  course  of 
traffic  resorted  to  or  devised  during  the  last 
two  years,  I  do  not  hesitate  to  say  are  unprece- 
dented in  the  whole  bad  record  of  the  past. 
.  .  .  Yet  among  us  railroad  men  the  fact 
that  these  things  are  done  is  notorious.  It  is 
all  part  and  parcel  of  that  sneak-thief  and  pick- 
pocket method  of  doing  business,  which  has 
become  a  second  nature  in  certain  grades  of 
railroad  service." J 

Mr.  Adams  charges  the  growing  degeneracy 
of  railway  morals  in  part  to  those  amendments 
of  the  Interstate  Commerce  legislation  which 
forbid  pooling  and  discrimination  in  relative 
rates  between  the  long  and  short  haul.  This 
charge  I  shall  notice  hereafter.  I  cite  the  pas- 
sage now  only  to  show  the  conceded  existence 
and  growth  of  the  evil. 

I  assume  that  a  consideration  of  the  effects  of 
railway  secrecy  is  of  transcendent  importance, 
not  only  because  of  the  vicious  practices  which 
secrecy  fosters  and  encourages,  but  also  because 
the  right  of  secrecy,  if  it  exists,  is  an  effective 
bar  to  a  complete  study  of  the  problem.  It 

1  "  The  Interstate  Commerce  Act  :  Its  Operation  and  its  Results." 
An  address  delivered  before  the  Commercial  Club  of  Boston,  Decem- 
ber 15,  1888,  by  Chas.  Francis  Adams,  (Rand  Avery  Supply  Co., 
Boston,  pp.  3-4.) 


38  RAILWAY  SECRECY. 

lies  across  the  threshold  of  the  problem.  It 
makes  clear  solution  impossible,  because  it  pre- 
vents the  use  of  the  factors  which  are  necessary 
for  solution.  Secret  methods  of  any  kind  have 
no  place  in  a  republic  where  they  may  by  any 
possibility  interfere  with  the  industrial  equality 
of  all  the  citizens. 

As  far  as  concerns  the  citizen  as  an  indi- 
vidual in  his  social  and  political  relations,  it 
would  be  almost  impossible  to  over-value  the 
right  of  privacy  and  the  essential  part  which 
the  maintenance  of  this  right  plays  in  his 
social  and  political  well-being.  That  a  man's 
house  is  his  castle;  that  general  warrants  are 
illegal ;  these  and  kindred  doctrines  of  the  Com- 
mon Law  only  epitomize  the  account  of  the 
struggles  by  which  the  Anglo-Saxon  race  sought 
to  work  out  the  problem  of  individual  liberty. 
From  the  application  of  these  principles  to  our 
modern  civilization,  we  have  derived  certain 
other  guards  to  individual  and  political  privacy. 
Thus,  the  secrecy  of  the  ballot  is  a  protection 
which  is  intended  to  enable  the  citizen  to  exer- 
cise the  fullest  freedom  of  his  choice.  It  is  in 
recognition  of  these  principles  also,  in  certain 
limited  and  well-defined  spheres  of  the  govern- 
ment, such,  for  instance,  as  in  the  conduct  of 
foreign  affairs,  that  secrecy  has  a  legitimate 
place.  Here  there  is  no  motive  which  tends 


EXISTING  RAILWAY  MANAGEMENT.  39 

to  impair  the  right  of  any  citizen  or  class  of 
citizens  of  the  country,  and  the  practical  reason 
of  this  State  secrecy  is  that  other  nations  might 
take  advantage  of  publicity.  Unguarded  pub- 
licity under  these  circumstances  would  be  a 
national  weakness.  Besides  this,  whilst  we  all 
recognize  that  secrecy  plays  a  proper  and  an 
important  part  in  military  movement,  we  know 
that  militant  conditions  are  entirely  distinct 
and  different  from  those  of  industry.  After 
all  this  is  considered,  it  may  be  set  down  as  an 
invariable  rule,  that  there  can  be  no  secret  meth- 
ods employed  by  a  republican  State,  or  by  any 
agent  of  such  State,  by  which  one  class  of  citi- 
zens receives  privileges  or  immunities  at  the 
expense  of  another,  and  that  here  it  is  one 
of  the  first  duties  of  sovereignty  to  prevent  the 
employment  of  such  methods. 

Not  a  few  reformers  have  suggested  a  correc- 
tion of  railway  abuses  by  legislation  which  shall 
hold  the  stockholder  financially  responsible  for 
corporate  mismanagement,  on  the  ground  that 
the  evils  consist  largely  in  speculation  and 
manipulation,  leading  to  disastrous  results.  But 
I  think  observation  will  show  that  the  defalca- 
tions and  bankruptcies  of  railways,  although 
they  have  here  and  there  entailed  hardships 
upon  creditors,  are  of  small  importance  as  com- 
pared with  the  industrial  evils  produced  by 


40  RAIL  WA  Y  SECRECY. 

secrecy  and  indirection  in  their  management. 
The  great  majority  of  the  railway  corporations 
in  this  country  have  been,  and  are  likely  to  be 
solvent,  and  even  with  unthrifty  management, 
their  immense  corporate  power,  employed  in 
secret  alliances  with  trusts  and  parasites,  has 
enabled  the  managers  to  postpone  or  prevent 
their  own  insolvency  and  the  insolvency  of  their 
roads,  by  placing  the  burden  of  their  misdeeds 
upon  dependent  industries.  When  insolvency 
does  sometimes  overtake  these  railways,  the 
stockholders  instead  of  being  responsible  for 
the  result,  are  in  common  with  the  public,  the 
victims  of  dishonest  managers,  and  they  belong 
therefore  to  a  class  that  in  common  with  the 
public  needs  protection.  Now  the  first  step 
towards  such  protection  will  clearly  be  to  bring 
to  light  in  detail  the  secret  processes  by  which 
these  disastrous  results  are  brought  about,  so  that 
the  public  may  understand  where  and  how  its 
rights  are  invaded,  and  the  stockholders  may 
learn  how  their  interests  are  injured  or  ruined. 
Such  an  end  will  not  result  from  merely  giving 
the  power  to  suitors  to  make  stockholders,  who 
become  victims  of  railway  mismanagement,  re- 
sponsible for  the  secret  machinations  which 
produce  disaster.  The  secrets  of  railway  man- 
agement brought  to  light,  the  evil  can  be  located 
exactly  and  the  remedy  applied.  It  should  be 
recognized  as  a  principle,  that  industrial  corpora- 


EXISTING  RAILWAY  MANAGEMENT.  41 

tions  which  necessarily  have  public  functions, 
can  have  no  right  to  secrecy  in  the  transaction 
of  their  business  with  the  public;  that  their 
records,  so  far  as  they  affect  this  public,  ought 
to  be  as  fully  open  to  inspection  and  scrutiny  as 
are  the  public  records  of  the  State.  We  all 
know  how  readily  the  defenders  of  quasi-public 
corporations  fall  back  upon  what  is  called  the 
constitutional  right  of  privacy,  but  any  true 
analysis  of  the  Constitution  with  reference  to 
the  quasi-public  corporation  must  show  that  the 
constitutional  right  of  privacy  was  meant  for 
the  individual  citizen — meant  to  guard  his  per- 
sonal and  private  and  political  status — and  that 
it  cannot  be  construed  to  confer  immunity  from 
investigation  upon  any  factitious  institution, 
which,  from  the  inherent  necessity  of  its  being, 
tends  to  impair  or  destroy  this  individual  right. 
A  corporation  is  not  a  human  being.  Its  domi- 
nation was  not  contemplated  by  the  Magna 
Charta,  nor  by  the  Bill  of  Rights,  nor  by  our 
Constitution.  It  is  essentially  artificial;  and 
when  it  is  treated  otherwise,  the  treatment  in- 
evitably mars  those  rights  which  were  contem- 
plated by  the  Magna  Charta,  the  Bill  of  Rights, 
and  the  Constitution.  If  a  corporation  with 
franchises  and  powers  derived  from  the  State 
can  secretly  build  up  the  interests  and  industries 
of  one  class  upon  the  bankruptcies  of  another, 
and  maintain  immunity  from  examination  into 


42  RAILWAY  SECRECY. 

the  means  by  which  this  is  done,  the  Constitu- 
tion cannot  be  other  than  a  warrant  for  corporate 
oppression  and  tyranny.  If  the  quasi-public 
corporation  is  thus  the  supreme  object  of  the 
government's  solicitude,  that  solicitude  involves 
neglect  of  the  individual  citizen,  both  as  to  his 
right  of  privacy  and  his  right  of  property.  A 
rate  of  freight,  then,  which  a  railway  corporation 
establishes  for  the  performance  of  its  service  to 
the  citizen,  is  essentially  a  public  matter  and 
cannot  be  a  legitimate  secret.  It  affects  every 
man's  business,  either  directly  or  indirectly.  It 
is  therefore  every  man's  right  to  know  what  it 
is.  If  secrecy  in  this  matter  is  conceded  to  the 
corporation,  even  though  it  does  not  immediately 
confer  the  right  to  bankrupt  one  citizen's  business 
by  building  up  another's,  it  at  least  affords  the 
corporation  the  opportunity  to  do  so,  and  the 
right  to  keep  the  secret  is  substantially  an  in- 
vitation to  make  use  of  the  opportunity.  From 
whatever  point  we  look  at  it,  we  shall  find  that 
secrecy  lies  at  the  bottom  of  corporation  tyranny, 
and  that  the  correction  of  this  must  mark  the  very 
first  step  to  any  adequate  reform. 

Hitherto  the  corporations  have  succeeded  in 
the  courts  in  maintaining  this  secrecy  by  judicial 
sanction.1  On  the  other  hand,  whatever  progress 

1  Boyd  vs.  U.  S.,  116  U.  S.,  p.  616  ;  Kilbourn  vs.  Thompson,  103 
U.  S.,  p.  168  ;  and  in  the  application  of  the  Pacific  Railway  Commis- 


EXISTING  RAILWAY  MANAGEMENT.  43 

the  Interstate  Commerce  Commission  has  made 
towards  bringing  to  light  the  evil  of  railway 
mismanagement,  has  been  accomplished  by  such 
search  as  it  was  enabled  to  make  with  its  limited 
power,  into  the  secrets  of  mismanagement. 

The  vices  of  railway  management  lurk,  then,  in 
secrecy — in  organized  secrecy ;  for  this  secrecy  is 
part  of  a  system  whereby  a  corporate  franchise, 
conferred  by  the  citizens  for  their  benefit,  is 
operated  for  unlawful  ends.  Dishonesty,  born 
of  this  secrecy,  is  an  essential  part  of  the  system. 
I  say  it  is  an  essential  part,  because  it  has  be- 
come a  prime  condition  for  success  in  the  rivalry 
among  the  different  corporations. 

Let  us  assume  the  owners  of  a  large  trunk 
line  to  be  in  search  of  an  honest  president,  and 
that,  in  their  search,  they  regard  intrinsic,  and 
not  merely  extrinsic,  honesty  as  the  necessary 
standard.  Let  us  assume  that  they  find  a  man 
who  answers  the  requirement.  He  is  one  who 
places  honesty  even  above  expediency.  He 
takes  control  of  one  of  the  great  trunk  lines, 
thoroughly  impressed  with  a  sense  of  his  duty 
as  an  intrinsically  honest  man — first,  as  a  trustee 
in  his  relation  to  the  State  from  which  the  fran- 
chise was  received  for  the  convenience  of  the 
citizens,  to  deal  justly  with  the  citizens;  and, 

sion  to  Circuit  Court  U.  S.  for  the  Northern  District  of  California 
to  compel  witness,  Leland  Stanford,  to  testify. — Fed.  Rep.,  p.  241. 


44  RAILWAY  SECRECY. 

second,  in  his  relation  as  trustee  to  the  stock- 
holders, as  a  guardian  of  their  interests,  and  as 
one  who  is  to  render  to  them  the  due  earnings 
of  the  road.  In  entering  upon  the  duties  of  his 
office  he  finds  competitors  carrying  freights  from 
Chicago  to  New  York  at  less  than  the  cost  of 
carriage,  and  recouping  their  losses  by  exactions 
from  patrons  at  local  points;  and  where  the 
power  of  the  road  is  supreme  at  these  local 
points,  making  such  exactions  excessive.  To 
meet  this  condition,  it  plainly  appears  that  like 
action  is  necessary  for  him.  In  other  words,  it 
is  necessary  for  him  to  rob  his  local  patrons  in 
order  to  meet  the  loss  incurred  in  carrying  freight 
at  less  than  cost  in  abnormal  competition.  He 
finds  officers  of  the  competing  roads  entering 
into  secret  alliances  with  individuals  and  cor- 
porations, by  which  they  build  up  the  industries 
of  some  and  bankrupt  those  of  others  of  the 
citizens,  sharing  as  individuals  in  the  profits 
that  are  made  by  the  favorites.  His  ideas  of 
justice  and  honesty  forbid  that  he  should  exact 
from  his  local  patrons  any  contributions  to  meet 
losses  which  those  local  patrons  have  had  noth- 
ing whatever  to  do  in  creating.  He  refuses  to 
enter  into  conspiracies  that  will  render  secret 
aid  to  one  class  of  citizens  and  bankrupt  another. 
But  what  will  be  the  result  of  following  these 
ideas  of  justice  and  honesty  ?  It  will  be  inevi- 


EXIS  TING  RA IL  WA  Y  MA  NA  GEM  EN  T.  45 

table  loss  of  business,  and,  if  persisted  in,  the 
inevitable  bankruptcy  of  the  road. 

If  what  I  have  thus  stated  be  a  fair  illustra- 
tion of  what  would  be  the  practical  result  of 
railway  management  if  strict  justice  and  honesty 
were  pursued  in  the  details  of  that  management, 
I  think  we  may  set  it  down  as  a  rule  that  that 
honesty,  which  I  have  designated  as  intrinsic,  to 
distinguish  it  from  the  extrinsic,  does  not  and 
as  a  matter  of  fact  cannot  prevail  in  the  present 
system  of  railway  management.  The  higher 
quality  of  honesty  is  not  to  be  looked  for  in 
any  system  where  such  honesty,  however  ac- 
companied by  executive  ability  and  business 
skill,  moves  towards  inevitable  bankruptcy  and 
business  disgrace,  and  where,  on  the  other  hand, 
craft  and  dishonesty  as  surely  lead  him  who 
practises  them  to  success.  Railway  managers 
understand  very  well  the  fact  of  this  present 
low  standard ;  they  all  accept  it  as  a  fact.  It  is 
what  causes  many  of  them  to  conclude  that 
those  who  are  not  railway  men  do  not  and  can- 
not realize  the  problem.  Moreover,  it  is  the 
fact  that  many  railway  men  employ  this  as  the 
final  answer  to  any  proposition  that  the  moralist 
may  make  for  reform.  To  such  an  one  they 
naturally  say :  "  If  you  were  in  our  place  you 
could  not  act  other  than  as  we  do.  Your  propo- 
sitions for  reform,  applied  to.  this  practical  situa- 


46  RAILWAY  SECRECY. 

tion,  are  worthless  theories.  -Were  we  to  give 
you  free  scope  for  putting  them  into  practice 
they  would  simply  bring  disaster  to  us.  Even 
if  you  were  to  stand  at  our  shoulders  suggesting 
the  specific  acts  of  reform,  and  if  we  were  to 
follow  your  advice  explicitly,  you  must  see  that 
we  should  either  lose  our  positions  or  bankrupt 
the  road ;  and  you  must  see,  too,  that  when  our 
competitors  should  have  taken  the  business 
from  us,  as  the  consequence  of  our  pursuing  the 
course  which  you  would  suggest,  the  stock-hold- 
ing investor,  although  he  might  close  his  eyes 
to  the  malversations  of  the  officers  who  appro- 
priate part  of  the  revenues  of  the  road  to  them- 
selves, would,  nevertheless,  be  very  alert  to 
condemn  your  methods,  which  are  so  plainly 
impracticable  that,  notwithstanding,  or  rather 
by  reason  of,  their  honesty,  they  would  produce 
certain  disaster." 

This  sort  of  reasoning  has  been  quite  effective. 
It  is  sometimes  convincing  even  to  the  class  of 
economists  who  fancy  themselves  practical. 
There  is  without  doubt  also  a  much  larger  class 
of  well-meaning  business  men  who,  while  they 
feel  sure  of  the  correctness  of  their  reasoning 
and  of  their  conclusions,  have  in  reality  become 
hopelessly  confused  with  the  ethical  phases  of 
the  railway  problem.  If,  in  the  beginning,  they 
are  possessed  with  a  clear  conviction  that  skill, 


EXISTING  RAILWAY  MANAGEMENT.  47 

sagacity,  and  honesty  are  the  true  requisites  for 
success  in  every  business,  in  the  progress  of 
their  examination  of  the  railway  problem  they 
come  to  discover  the  inevitable  difficulties  and 
disasters  which  environ  and  follow  the  reso- 
lutely honest  railway  manager.  When  in  their 
further  investigation  they  come  into  intimate 
association  with  railway  men  and  hear  argu- 
ments from  these  men,  such  as  those  that  I  have 
indicated  above,  they  become  profoundly  im- 
pressed with  the  uniform  power  of  what  begins 
to  seem  to  them  like  natural  necessity;  thus 
realizing  how  continuously  and  rigorously  the 
system  controls  the  individual,  they  come  to 
believe  that  there  is  an  inherent  antagonism 
between  intrinsic  honesty  and  practically  suc- 
cessful railway  management.  Their  corollary 
from  all  this  is  that  railway  management  is  not 
properly  to  be  measured  by  the  same  tests  as 
those  which  we  would  apply  to  the  conduct  of 
men  in  ordinary  employment.  Having  arrived 
at  this  point,  they  look  back  over  the  mental 
processes  by  which  they  reached  their  conclu- 
sions, and  fancy  that  they  themselves  were 
theorists  when  they  undertook  to  make  a  rigor- 
ous standard  of  honesty,  and  that  all  who  seek 
to  insist  upon  such  a  standard  are  visionary. 
The  more  they  reflect  upon  this  the  more  fully 
they  are  convinced.  They  observe  that  men 


48  RAILWAY  SECRECY. 

whom  they  know  to  be  practical — those  who  are 
in  actual  contact  with  the  industry — have  but 
one  way  of  thinking — that  is,  that  success  can 
only  be  procured  by  so-called  practical  means, 
that  all  else  is  theory,  and  that  theory  means  dis- 
aster. The  investigators  are  now  prepared  to  hear 
from  the  railway  managers,  and  to  believe  that 
it  is  absolutely  necessary  for  the  railway  mana- 
gers themselves  to  regulate  the  transportation 
interest;  that  any  influence  from  the  outside, 
which  assumes  to  rest  upon  general  principles, 
must  be  a  theoretic  influence ;  and  especially 
that  it  is  necessary  for  the  well-being  of  the 
industry  upon  which  all  industries  depend,  that 
the  State  should  not  interfere  with  the  problem. 
To  return  to  the  question  of  honesty ;  there 
are,  indeed,  not  wanting  moral  teachers,  well- 
meaning  no  doubt,  but  who,  having  formed 
their  judgment  upon  these  appearances,  would 
condemn  the  president  who  permitted  the  fail- 
ure of  his  road,  by  disregarding  the  existing 
system  of  management.  To  them  such  a  presi- 
dent would  appear  only  as  an  unjust  steward — 
untrue  to  his  employers ;  and  especially  as  one 
who  has  ruthlessly  impaired  the  interests  of 
such  of  his  stockholders  as  are  widows  and 
orphans.  So  the  inference  becomes  very  com- 
mon that  in  this  field  of  business  at  least,  in 
order  to  be  strictly  honest,  one  must  be  a  theo- 


EXISTING  RAILWAY  MANAGEMENT.  49 

retic  visionary;  in  order  to  be   practical,  one 
must  be  dishonest. 

When  we  undertake  to  analyze  the  railway 
manager's  sense  of  his  relation  to  general 
honesty,  we  shall  find  that  it  is  not  necessary  to 
assume  that  he  wishes  to  be  dishonest;  nor, 
indeed,  that  he  believes  himself  to  be  so.  He 
may  simply  think  of  himself  as  "  a  practical 
man,"  and  may  seek  the  justification  of  his 
course  in  what  seems  to  him  to  be  its  necessity. 
He  may  be  a  bank-director,  or  the  trustee  of 
a  private  estate,  and  in  these  relations  per- 
form his  duties  scrupulously,  because  here 
the  guards  for  honesty  are  effective  and  dis- 
honesty entails  disgrace.  He  may  also  be  ex- 
emplary in  his  social  and  domestic  relations. 
He  may  be  a  church  member,  and  as  such  may 
regard  himself  as  entirely  consistent,  but  for  all 
this  the  relation  between  his  precepts  and  his 
railway  practices  are,  as  they  must  be,  indefinite 
and  conflicting.  Sermons  may  be  preached  to 
him  upon  the  general  duty  of  right  conduct. 
He  may  attentively  listen  to  them,  and  be  in- 
duced by  them  to  make  large  contributions  for 
the  reformation  of  society ;  but  he  will  never  be 
likely  to  realize  that  any  thing  from  the  pulpit 
is  aimed  at  or  applied  to  him,  even  though 
references  to  his  conduct  may  sometimes  be 
rather  pointed.  If  any  thing  were  to  suggest 


50  RAILWAY  SECRECY. 

to  him  upon  a  Sunday  tor  ask  himself  the 
biblical  questions  "  Whose  ox  have  I  taken  ? 
Whom  have  I  defrauded?  Whom  have  I 
oppressed  ?  Or  of  whose  hand  have  I  received 
any  bribe  to  blind  my  eyes  therewith  ? " T  the 
questioning  would  not  in  the  least  degree  deter 
him  from  still  supporting  the  alliance  of  his 
road  with  a  Cattle  Trust,  by  which  he  and  his 
associates  are  secretly  abstracting  from  the 
owners  the  chief  values  of  all  the  herds  of  the 
land.  He  will  never  perceive  any  contradiction 
between  his  Sunday  creed  and  his  week-day 
conduct. 

When  we  come  to  consider  the  effect  of  this 
system  upon  the  public  mind,  we  shall  find  that 
it  has  been  as  insidious  as  the  processes  which 
produced  it.  Men  who  do  not  do  their  own 
thinking,  take  their  conclusions  from  those 
nearest  them  who  do.  And  when  men  conclude 
that  dishonesty  is  necessary  to  industrial  prog- 
ress in  any  department,  the  whole  unthinking 
mass  of  the  people  easily  modify  the  rigor  of 
their  judgments  concerning  dishonesty;  they 
condone  and  euphemize  it,  if,  indeed,  it  does  not 
appear  to  them  in  the  guise  of  an  industrial 
virtue. 

But  is  it  a  fact  that,  in  any  business,  success 
'must  rest  upon  so  low  a  moral  basis  ?  I,  for  one, 

1  Book  of  Samuel,  chap,  xii.,  3d  verse. 


EXISTING  RAILWAY  MANAGEMENT.  5  I 

have  no  doubt  that  it  is  not.  The  whole  diffi- 
culty seems  to  me  to  arise  from  a  confusion  of 
appearances,  from  efforts  to  deal  with  details 
which  have  a  veil  of  secrecy  thrown  over  them. 
"We  have  not  been  able  to  see  through  the  ex- 
pedients which  lie  about  us  into  the  principles 
which  lie  behind  those  expedients.  We  have 
not  gotten  to  the  bottom  of  the  matter.  Where 
wholesome  industrial  and  economic  conditions 
prevail,  honesty  needs  never  be  sacrificed  for 
success  or  for  profitable  service  to  the  public. 
The  fact  that  honesty  is  so  sacrificed  in  railway 
management  points  with  unerring  certainty  to 
the  overwhelming  power  and  to  the  inherent 
viciousness  of  a  secret  system  which  has  reached 
its  present  mammoth  proportions  by  reason  of 
the  carelessness  of  the  guardian,  the  State,  to 
control  it. 

In  casting  about  in  search  for  specific  per- 
sonal responsibility  for  the  iniquities  of  railway 
management,  it  must  be  confessed  that  the 
origin,  at  least,  of  these  iniquities  cannot  be 
traced  to  any  one  individual.  No  one  railway 
manager  at  any  time,  now  or  since  the  begin- 
ning, can  properly  be  charged  with  the  creation 
of  the  system ;  nor  even  can  any  single  combi- 
nation be  held  responsible  for  its  existence.  In 
the  broad  sense  it  has  been  an  impersonal  evo- 
lution. It  embraces  all  roads,  and  there  is  no 


$2  KAIL  WAY  SECRECY. 

place  in  the  whole  field  of  industry  where  ex- 
isting conditions  have  ruled  so  tyrannically,  no 
place  where  the  individual  seems  to  go  for  so 
little  and  the  surroundings  for  so  much  as  here. 
And  among  all  the  men  who  enter  the  railway 
service,  it  is  those  who  enter  the  highest  grades 
that  most  feel  the  pressure  of  their  surround- 
ings. Just  in  the  degree  that  an  officer  is 
clothed  with  authority,  in  that  degree  he  finds 
the  exercise  of  his  power  controlled  by  those 
inexorable  conditions,  wherein  success  lies  only 
in  pursuing  pre-established  methods  and  where 
failure  as  certainly  results  from  a  disregard  of 
those  methods.  The  first  day  on  which  this 
officer  assumes  the  duties  of  his  place,  he  is 
confronted  with  the  question,  not  "  What  shall 
I  do  to  manage  my  road  justly  ?  "  but  "  What 
will  my  competitors  compel  me  to  do  to  manage 
it  without  disaster  ?  "  The  only  strict  honesty 
that  is  possible  in  this  system  is  that  subordi- 
nate honesty  which  consists  in  the  merely  min- 
isterial and  functional  act  of  keeping  accounts, 
and  this  is  secured  as  a  necessary  part  of  the 
system  through  the  audit.  Where  a  man  has 
no  choice,  where  his  policy  is  a  result,  not  of  his 
unbiased  judgment,  but  of  his  immediate  neces- 
sities, we  must  remove  those  necessities  and  give 
his  judgment  freedom  of  scope,  before  we  can 
hold  him  strictly  responsible  for  his  acts. 


EXISTING  RAILWA  Y  MANAGEMENT.  53 

This  system  came  with  the  first  delegation 
of  power  by  the  grant  of  a  railway  charter. 
Though  the  evils  were  small  and  unnoticed  at 
first,  they  were  there.  It  was  because  they 
were  unnoticed,  because  they  were  secret,  that 
they  grew  all. the  more  insidiously.  The  growth 
was  promoted  by  the  influence  of  the  decision 
in  the  Dartmouth  College  case,  which  gave  com- 
plete power  to  all  corporations  by  construing 
charters  as  irrevocable  contracts  between  the 
sovereignty  and  the  corporations,  and  thereby 
conferring  a  share  in  industrial  sovereignty  upon 
organizations  whose  inherent  motive  is  aggran- 
dizement. Since  that  decision,  all  who  have 
managed  railways  have  come  under  this  influ- 
ence. Some  have  made  readier  and  completer 
use  than  others  of  its  dishonest  opportunities. 
But  nothing  that  any  one  individual  or  set  of 
individuals  could  have  done,  either  by  example 
or  advice,  under  this  system,  could  have  changed 
it  radically.  Something  more  than  moral  sua- 
sion was  necessary  to  correct  it. 

Even  the  projectors  of  the  Standard  Oil  Trust 
cannot,  in  a  large  sense,  be  said  to  be  responsible 
for  the  inherent  vices  of  this  system.  Those  vices 
existed  and  flourished  when  that  trust  first  ap- 
peared. The  organizers  of  that  trust  followed 
the  line  of  least  resistance.  They  found  a  sys- 
tem of  secret  rebates  and  discriminations  in 


54  RAIL  WA  Y  SECRECY. 

flourishing  existence.  Should  they  become  par- 
ticipants of  these  secret  rebates  and  discrimina- 
tions, or  become  the  victims  of  them  ?  Survey- 
ing the  field,  and  seeking  to  work  out  their  own 
individual  success  with  the  means  they  found 
around  them,  they  naturally  chose  the  second 
alternative.  Instead  of  becoming  the  victims 
themselves,  they  employed  the  ready-made  sys- 
tem, and  made  their  competitors  the  victims. 
It  was  because  they  adapted  themselves  skil- 
fully to  the  system  that  they  became  masters 
of  the  situation.  Nor  can  it  be  said  that  the 
managers  of  the  trunk  lines,  when  they  made 
the  Standard  Oil  Trust  the  distributor  of  oil 
freights  among  the  different  lines,  were  acting 
as  free  agents ;  for  the  manager  of  each  of 
these  lines,  in  a  natural  effort  to  take  the  vol- 
ume of  business  to  his  line,  had  been  employing 
devices  to  circumvent  the  managers  of  the  other 
lines.  In  consequence  of  this,  wars  of  abnormal 
competition  prevailed.  In  these  wars  the  trunk 
lines  derived  their  resources  from  exactions  upon 
tributary  railways  and  upon  the  helpless  local 
patrons  on  their  lines  ;  but  even  with  these  ex- 
actions the  resources  of  the  contesting  lines 
tended  toward  depletion.  In  all  this  warfare 
the  managers  of  the  several  trunk  lines  were  in 
a  continual  state  of  mutual  distrust,  and  com- 
pacts between  them  proved  to  be  inefficient. 


EXISTING  RAILWAY  MANAGEMENT.  5$ 

In  their  helplessness  they  saw  the  opportunity 
of  protecting  themselves  from  loss,  at  least  in 
petroleum  freights,  by  conferring  upon  the 
Standard  Oil  Trust  the  complete  control  of 
these  freights.  This  was  their  only  means  of 
securing  to  each  line  a  fixed  percentage  of 
oil  freights.  The  common  prey  in  this  ar- 
rangement was  the  independent  outside  refiner. 
Yet  the  combination  of  the  managers  of  the 
trunk  lines  with  the  Standard  Oil  Trust 
was  not  merely  wanton  or  vicious,  for  it  is 
easily  seen  that  there  were  necessities  which 
dictated  it,  and  that  these  necessities  arose  from 
the  antecedent  conditions  of  the  case.  While 
it  is  true  that  there  was  another  consideration 
in  the  arrangement,  which  was  not  based  upon 
helplessness, — a  consideration  whereby  the  rail- 
way managers  personally  shared,  through  interest 
in  the  Standard  Oil  Trust,  a  secret  division  of 
the  rebates  and  discriminations  which  were 
abstracted  from  the  roads  which  they  managed, 
—yet  even  this  was  suggested  by  the  circum- 
stances ;  it  was  in  the  line  of  development  with 
the  vices  of  a  system  which  invites  and  makes 
such  appropriation  easy.  All  that  may  be  said 
of  the  whole  scheme  is  that  those  engaged  in  it 
employed  existing  methods  to  their  utmost  ca- 
pacity. While  they  thus  elaborated,  they  did 
not  invent,  the  system. 


56  RAILWAY  SECRECY. 

The  enormous  power  of  the  system  itself  in 
influencing  moral  standards,  and  its  inherent 
tendency  towards  such  influence,  lead  us  to  the 
natural  conclusion  that  the  problem  in  its  lar- 
gest aspect  is  not  a  personal  one ;  that  it  is,  in 
fact,  a  cold  economic  question ;  and  that  when 
we  are  looking  for  a  solution,  it  is  only  by  so 
regarding  it  that  we  can  clearly  at  last  reach 
the  end  sought.  The  examination  of  the  prob- 
lem should,  therefore,  be  conducted  in  no  spirit 
of  animosity.  We  should  remember  that  the 
men  who  are  connected  with  the  railway  system, 
and  who  have  come  under  its  influence,  are  men 
who,  considered  one  with  another,  are  neither 
better  nor  worse  than  any  like  number  of  men 
taken  indiscriminately.  Some  of  them  are  men 
of  great  ability,  but  there  are  great  differences 
even  between  men  of  ability.  There  are  many 
in  the  railway  service  who  suit  this  system,  and 
whom  it  perfectly  suits  ;  and  it  is  because  they 
suit  it  and  it  suits  them  that  they  become  more 
influential  than  do  those  who  do  not  suit  it  and 
whom  it  does  not  suit.  When  a  man  of  con- 
science and  principle,  like  Mr.  Adams,  connects 
himself  with  such  a  system,  and  feels,  as  he 
inevitably  must,  a  conscientious  repugnance  for 
much  that  exists  in  it,  he  cannot  reasonably 
hope  by  mere  moral  suasion  to  subdue  into 
acquiescence  those  whom  that  system  suits  ;  nor 


EXISTING  RAILWAY  MANAGEMENT.  $? 

can  he  safely  ignore  the  fact  that  those  whom  it 
suits  and  who  suit  it  are  always  likely  to  exert 
a  more  dominant  influence  in  it  than  are  those 
who,  like  him,  find  it  full  of  dishonest  demands. 
Whilst  indeed  there  are  a  great  many  of  the 
railway  men  who  doubtless,  were  they  in  a 
position  where  honesty  could  be  as  easily  prac- 
tised as  dishonesty,  would  greatly  prefer  the 
honest  course,  yet  we  must  bear  in  mind  that 
where  a  system  is  so  potent  in  its  operation  as 
inevitably  to  distort  conduct,  the  influences 
which  bring  about  reform  must  be  something 
more  than  those  of  a  persuasive  kind ;  some- 
thing more  than  influences  which  consist  in 
suggestions  of  restraint  urged  upon  those  who 
are  in  control  of  that  system,  and  consequently 
in  accord  with  it.  There  must  be  a  comprehen- 
sive law  with  a  sanction ;  a  law  which  derives 
its  confirmation  from  the  certainty  with  which 
its  terms  are  enforced.  The  power  to  enforce 
this  law  must  be  one  which  exists  outside 
of  and  above  the  system  to  be  reformed.  It 
must  be  a  power  which  is  unmoved  by  the 
sinister  influences  of  that  system — which  is  un- 
affected by  any  motives  of  private  gain.  More- 
over, in  a  republican  government,  it  must  be  a 
power  which  is  impressed  with  the  supreme 
importance  of  guarding  the  equal  industrial 
right  of  every  citizen.  To  accomplish  its  ends 


58  RAILWAY  SECRECY. 

it  must  exercise  constant  supervision  over,  and 
constant  restraint  upon,  any  organization  which 
fosters  cunning,  fraud,  evasion,  secrecy,  and  dis- 
honesty. In  our  country  this  power  can  only 
be  the  State. 


CHAPTER  III. 


PUBLIC  EESPONSIBILITY  FOB  EXISTING  EVILS. 

The  Desire  for  Physical  Convenience,  and  its  Influence  on  Railway 
Development  —  The  Confusion  of  Causes  and  Incidents  in  the 
Multiplication  of  Conveniences  —  The  Changes  in  Public  Opinion, 
and  their  Expression  in  Hostile  State  Legislation  —  The  Inter- 
state Commerce  Law,  and  the  Methods  Employed  to  Evade  its 
Provisions  —  Mr.  Adams  on  the  Workings  of  the  Interstate  Legis- 
lation —  His  Proposed  Remedy  through  Legislative  Sanction  to 
Compacts  between  the  Railways  —  The  Inefficiency  of  Such  Rem- 
edy, and  its  Violation  of  Fundamental  Right  —  The  Corporation 
as  an  Arbiter  of  the  Right  of  the  Citizen  —  The  Necessity  for 
a  Supervising  Power  at  once  Efficient  and  Disinterested. 


we  consider  the  almost  uninterrupted 
continuance  of  vicious  methods  in  railway  man- 
agement ;  when  we  note  the  circumstance  that  a 
few  men,  in  control  of  the  railways,  have  been 
able  to  absorb  a  great  part  of  the  results  of 
industrial  growth  ;  when  we  see  how  they  have 
managed  to  keep  the  great  sum  of  the  excess 
from  the  legitimate  investor,  the  stockholder, 
and  from  normal  diffusion  among  the  industries 
which  helped  to  create  it,  we  cannot  but  be 
amazed  that  even  organized  secrecy  should  have 
been  so  continuously  successful  ;  and  amazed, 

59 


60  RAILWAY  SECRECY. 

too,  at  the  apathy  which  has  -kept  the  public 
from  a  study  of  these  practices. 

When  we  come  to  examine  the  problem, 
however,  we  are  enabled  to  discover  not  only 
that  there  is  valid  reason  for  this  continued 
state  of  affairs  and  for  the  public  apathy  con- 
cerning it,  but  that  there  is  also  substantial 
reason  for  the  fact  that  the  general  public  has 
been,  to  a  large  degree,  unconsciously  responsi- 
ble for  it. 

As  I  have  hitherto  suggested,  there  are  many 
who,  lacking  either  the  disposition  or  the  power 
to  reason  carefully,  have  been  induced  to  regard 
the  Standard  Oil  Trust  as  an  organization  which 
has  exerted  a  beneficent  instead  of  an  evil  in- 
fluence, because  of  the  incidental  and  superficial 
fact  that  during  the  progress  of  its  growth  the 
product  in  which  it  dealt  has  become  cheaper 
to  the  consumer.  Their  inference  from  this  fact 
is  that  all  the  means  which  are  employed  by  that 
trust  were  necessary  to  produce  this  result,  and 
did  produce  it.  In  like  manner  with  the  rail- 
ways. Not  a  little  has  been  written  in  the  rail- 
way interest  to  show  that  the  railway  manage- 
ment has  cheapened  product ;  with  the  preg- 
nant inference  that  this  management  not  only 
sought  to  accomplish  the  cheapening,  but  also 
that  all  the  methods  which  were  employed — the 
artifices,  the  secret  discriminations — were  the 


PUBLIC  RESPONSIBILITY.  6 1 

desirable    and   necessary  means   of  producing 
such  result. 

The  state  of  mind  which  prevents  careful 
examination  into  principles  and  induces  the  un- 
thinking to  attribute  the  benefits  of  cheapness 
to  combination,  is  precisely  the  same  as  that 
which  deters  men  from  careful  examination  of 
the  general  railway  problem.  It  is  the  same 
also  as  that  which,  when  certain  of  the  evils  of 
the  railway  system  first  forced  themselves  upon 
public  notice,  led  men  to  condone  those  evils. 
This  state  of  mind  springs  from  an  exaggerated 
sense  of  physical  convenience,  which  expresses 
itself  by  a  disposition  to  encourage  without  ex- 
amination whatever  increases  physical  comfort. 
Those  who  manage  the  mechanism  which  con- 
fers this  convenience  are,  in  a  vague  vvay,  re- 
garded as  though  they  were  its  creators ;  and 
there  is  also  a  general,  though  rather  indefinite, 
apprehension  that  a  determined  examination 
into  the  methods  by  which  these  assumed  crea- 
tors work,  might  result  in  an  interruption  of  in- 
dustrial progress,  or  even,  to  some  extent,  in  a 
withdrawal  of  railway  facilities  from  the  public. 
This  desire  of  convenience  is  not,  therefore, 
favorable  to  accurate  thought.  It  especially 
tends  to  cloud  the  perceptions  of  those  who  are 
not  in  the  habit  of  reasoning;  and  there  are 
those  engaged  in  railway  and  trust  interests 


02  RAILWAY  SECRECY. 

who  realize  this,  and  who  have  not  been  slow  to 
take  advantage  of  it. 

When  we  reflect  that  in  the  past  thirty  years 
appliances  for  physical  convenience  have  multi- 
plied as  never  before  in  the  history  of  the  world, 
we  may  better  appreciate  the  force  of  the  in- 
fluence which  has  kept  the  public  apathetic, 
apprehensive  of  examination  into,  and  apologetic 
for  the  evils  of,  railway  management.  There- 
fore I  say  that  this  desire  of  convenience,  more 
than  any  one  factor  in  modern  civilization,  has 
not  only  blurred  men's  economic  vision  with 
reference  to  the  railway  problem,  but  it  has  cre- 
ated a  great  distaste  for  the  study  of  the  princi- 
ples of  political  economy  and  a  general  confu- 
sion regarding  them.  It  has  produced  a  persist- 
ent hopefulness  and  optimism  in  the  popular 
mind  in  the  presence  of  serious  economic  evils, 
—an  optimism  which  to  the  student  of  economic 
principles  has  been  exceedingly  discouraging. 
It  has  furnished  individual  instances  of  public 
indifference  to  the  disasters  which  have  been 
brought  upon  men  of  high  skill,  sagacity,  and  pro- 
bity through  the  secret  discriminations  of  the  rail- 
ways ;  and  it  has  also  furnished  instances  of  the 
approval  by  the  public  of  the  successes  of  in- 
ferior men,  who  have  acquired  great  fortunes 
through  these  secret  means.  So  overpowering 
has  this  desire  for  physical  convenience  been 


PUBLIC  RESPONSIBILITY.  63 

that  it  lias  had  to  take  its  course.  It  was  not 
until  the  possession  of  transportation  facilities 
rendered  them  familiar  and  commonplace,  and 
not  until  the  evils  of  vicious  management  grew 
to  be  insupportable,  that  there  came  at  last  a 
dim  realization  of  the  fact  that  those  associated 
with  the  management  and  conduct  of  these  fa- 
cilities were  not  after  all  fiat  creators  ;  that  they 
were  not  even  beneficent  promoters;  that  the 
advantages  which  came  to  the  public  through 
their  action,  came  not  from  a  disposition  to  fur- 
ther public  advantage,  much  less  to  maintain 
public  right,  but  that  these  men  were  definitely 
in  pursuit  of  their  own  gain ;  that  they  followed 
their  own  interests  so  narrowly  and  so  aggres- 
sively as  to  obstruct  the  very  results  which  they 
claimed  credit  for  creating ;  and  that  so  far  as 
their  aims  and  motives  were  concerned,  the  pub- 
lic welfare  was  not  only  not  the  object  of  their 
designs,  but  in  so  far  as  this  welfare  was  not  im- 
peded by  them,  it  was  simply  an  unavoidable 
incident  in  the  accomplishment  of  their  selfish 
ends. 

It  ought  then  to  be  sufficiently  obvious,  in  a 
survey  of  the  progress  of  industry,  that  secrecy 
and  abstraction  were  and  are  not  necessary  in 
order  that  we  might  have  railways;  that  we 
should  have  had  railways  in  accordance  with 
the  demands  of  industry  if  strict  honesty  in- 


64  RAILWAY  SECRECY. 

stead  of  loose  dishonesty  had  prevailed  in  their 
administration ;  that  we  should  have  had  them 
in  prompt  response  to  the  country's  demand,  in 
sufficient  number  and  under  conditions  which 
would  have  been  in  far  better  accord  with 
civilization  than  those  which  now  prevail. 
There  would  then  have  been  a  far  greater  sense 
of  security  for  the  stockholder,  a  far  more 
perfect  sense  of  confidence  in  the  constancy  of 
industrial  law,  and  a  far  more  equal  distribution 
of  the  advantages  which  come  from  the  progress 
of  the  railway.  Fortunes  which  are  now  un- 
wholesomely  concentrated  would  have  been 
wholesomely  and  naturally  diffused.  We  should 
not  then  have  had  instances  of  a  few  men  in  the 
possession  of  great  corporations,  standing  at  the 
termini  of  railways,  and  through  stratagem  and 
by  secret  alliances  making  exactions  upon  the 
industrial  activity  of  every  individual  in  the 
country,  and  employing  the  fruits  of  such  exac- 
tions in  so  enlarging  their  power  as  to  come  at 
last  to  be  the  virtual  owners  of  immense  trunk 
lines.  Nor  would  these  men  have  been  able 
then  to  beguile  the  public  into  quiet  acquies- 
cence in  their  methods  through  impressing  the 
public  mind  with  an  apprehension  of  their 
power,  or  with  the  notion  of  their  beneficence 
as  creators  of  progress.  It  is  plain  to  see,  also, 
that  under  such  conditions  we  should  not  have 


PUBLIC  RESPONSIBILITY.  65 

that  mystification  of  economic  principles  which 
prevails  in  the  common  mind.  We  should 
not  have  theorists  proposing  to  reform  evils 
concerning  the  secret  sources  of  which  they 
are  ignorant.  We  should  not  have  reformers 
who  seek,  by  a  procrustean  rule,  to  limit  all 
accumulations ;  to  deal  with  accumulation  itself 
as  the  evil,  without  reference  to  the  honesty  or 
dishonesty  of  the  methods  by  which  such 
accumulation  is  made.  We  should  not  have 
those  other  reformers  who  seek  to  hold  the 
victims — the  minority  stockholders  of  corpora- 
tions— responsible  for  the  secret  and  undefin- 
able  machinations  of  the  directors.  Nor  should 
we  now  have  to  contend  with  the  delusion 
that  in  order  to  correct  the  evils  of  railway 
mismanagement,  it  is  necessary  that  railway 
transportation  itself  should  be  interrupted  by 
the  enactment  of  capricious  and  vindictive 
legislation. 

We  should  be  able  to  realize,  too,  that  the 
managers  of  railways  have  not  created  new 
economic  laws,  nor  changed  the  value  of  the 
old  ones ;  but  that  they  have  made  the  applica- 
tion of  the  old  ones  a  somewhat  more  complex 
and  difficult  thing.  By  the  multiplication  of 
material  details  which  they  have  created,  they 
have  tended  towards  complicating  the  problem. 
By  the  conveniences  which  they  have  furnished. 


66  RAIL  WA  Y  SECRECY. 

they  have  produced  an  indisposition  to  examine 
into  those  economic  laws  which  are  violated: 
and  by  the  secret  methods  which  they  have 
practised,  they  have  concealed  their  processes. 

I  have  said  that  we  are  beginning  to  have  a 
dim  realization  of  the  true  conditions.  This, 
without  doubt,  indicates  an  advance,  and  when 
the  controlling  factors  of  the  problem  shall  be 
revealed  by  the  complete  removal  of  the  secrecy 
which  now  conceals  them,  we  shall  not  only  be 
able  better  to  appreciate  those  particular  in- 
stances of  evil  consequences,  but  the  whole  eco- 
nomic problem  of  industry,  as  related  to  the 
political  rights  of  the  citizens,  will  come  to  be 
better  understood.  Moreover  it  will  then  not 
require  any  great  faculty  for  generalization  to 
enable  us  to  discern,  as  a  further  consequence  of 
this  secrecy,  the  relation  that  exists  between  the 
methods  of  railway  management  and  those  of 
secret  labor  organizations.  Above  all,  we  shall 
be  enabled  definitely  to  perceive  that  success  in 
the  management  of  a  quasi-public  corporation 
does  not  require  concealment  of  its  workings ; 
that  that  domestic,  political,  and  industrial 
privacy  which  freedom  means  to  guarantee  to 
the  individual  citizen,  is  not  to  be  confounded 
with  the  illicit  secrecy  which  so  usurps  the  place 
and  mars  the  quiet  possession  of  this  legitimate 
privacy. 


PUBLIC  RESPONSIBILITY.  6? 

From  the  first  small  preferential  advantage 
granted  to  the  favored  shipper,  from  the  first 
simple  discrimination  and  the  division  of  its 
fruits  between  the  railway  manager  and  this 
shipper,  down  to  the  control  of  whole  industries 
built  upon  an  organized  system  of  abstraction, 
there  has  been  a  continuous  relation  of  cause 
and  effect — an  evolution,  as  I  have  said,  of  pres- 
ent methods.  The  first  success  in  dereliction 
stimulated  the  second,  the  second  stimulated 
and  developed  the  third,  and  so  the  evil  grew 
until  its  pressure  upon  industrial  right  became 
intolerable.  It  was  then  that  here  and  there, 
under  exceptionally  strong  provocation,  the 
public  was  roused  to  action ;  but  this  action 
was  confined  to  special  cases,  and  these  were 
cases  only  in  which  an  incoherent  sentiment 
acted  spasmodically  upon  a  coherent  and  organ- 
ized system.  Under  the  pressure  of  excitement, 
moved  by  the  weight  of  pressing  evils,  legisla- 
tures were  brought  to  enact  retaliatory  legisla- 
tion, but  this  often  partook  of  the  evils  to  be 
reformed,  and  aggravated  instead  of  reforming 
them.  As  one  method  will  stimulate  the 
growth  of  counter  methods,  so  secret  associations 
came  to  flourish  in  all  branches  of  industry. 
Delusions  bred  delusions,  and  in  the  failure  of 
the  retaliatory  legislation  to  produce  reform,  it 
came  to  be  assumed  by  many  among  the  op- 


68  RAILWAY  SECRECY. 

posers  and  the  defenders  of  ^corporations  and 
trusts,  that  certain  vicious  methods  in  railway 
management  were  essential  to  its  being,  and  that 
dishonesty,  as  I  have  heretofore  endeavored  to 
illustrate,  was  one  of  these. 

It  was  here  that  some  of  the  economists  em- 
ployed in  the  railway  interests  found  their 
opportunity  for  working  upon  the  credulity  and 
apprehension  of  the  public.  The  danger  of  dis- 
turbing an  established  system  was  emphasized 
and  dwelt  upon.  Many  were  made  to  believe 
that  interests  which  are  managed  on  so  large  a 
scale  as  are  the  railway  interests,  must  of  neces- 
sity be  free  from  all  political  restraint ;  that  not 
only  does  a  regard  for  the  public  convenience 
require  this,  but  that  the  interests  of  the  stock- 
holders demand  it,  and  that  capital  would  not 
be  likely  to  flow  into  enterprises  upon  which 
restraints  are  placed  by  the  State.  But  as  the 
true  conditions  came  slowly  to  impress  them- 
selves upon  the  public  mind  through  the  great 
burden  of  the  railway  evil,  the  necessity  for  ex- 
amination became  imperative,  and  just  as  this  ex- 
amination proceeds,  it  teaches  the  fallacious  and 
superficial  character  of  such  appeals  to  fear  and 
credulity.  This  examination,  by  demonstrating 
the  real  obstacle  in  the  way  of  correct  railway 
management  to  be  organized  and  systematic  se- 
crecy, shows  by  necessity  that  this  secrecy,  so  far 


PUBLIC  RESPONSIBILITY.  69 

from  being  indispensable  for  security  of  capital, 
is  a  positive  and  constant  menace  to  the  perma- 
nency and  safety  of  all  investment.  When  then, 
men  are  forced  through  the  necessity  of  their 
surroundings  to  think  upon  this  subject,  they 
recognize  that  the  assumption  that  railway 
management  ought  not  to  be  interfered  with  by 
the  State  involves  the  concession  that  dishonesty 
is  an  essential  of  industrial  growth.  When  the 
mind  is  relieved  of  these  concessions  and  as- 
sumptions, it  becomes  plain  that  there  can.  be 
no  danger  that  investments  will  ever  cease  or 
be  prevented  by  reason  of  the  honesty  of  the 
custodian  of  those  investments ;  that  wherever 
capital  may  be  profitably  and  safely  invested, 
there  capital  will  go,  and  that  where  there  exists 
the  means  of  knowing  through  publicity  all  of 
the  conditions  which  surround  investment,  the 
sense  of  certainty  which  comes  to  the  capitalist 
will  make  him  all  the  more  ready  to  invest; 
that,  in  a  word,  with  secrecy  removed  from 
railway  management,  activity  will  flourish  bet- 
ter in  honest  conditions  than  in  dishonest  ones, 
and  far  more  wholesomely  for  the  well-being  of 
the  individual  and  of  the  public. 

The  Interstate  Commerce  legislation  which 
Congress  has  thus  far  enacted  does  not  furnish 
the  power  necessary  for  reaching  the  secret 
practices  of  the  railway  managers,  which  it  was 


70  KAIL  WAY  SECRECY. 

the  object  of  the  legislation  to  expose  and  to 
prevent.  Indeed,  it  has  not  proven  even  suffi- 
cient to  extract  here  and  there  in  specific  cases 
that  information  which  was  necessary  for  the 
determination  of  such  cases. 

Whatever  differences  of  opinion  there  may  be 
among  railway  men  as  to  the  vices  of  the  system, 
and  as  to  the  viciousness  of  the  methods  prac- 
tised, there  seems  to  be  quite  an  uniform  objec- 
tion among  them  to  any  legislation  directed 
towards  a  specific  examination  of  these  methods. 
Mr.  Adams,  whilst  he  freely  recognizes  many  of 
the  evils  of  railway  management  as  issuing  from 
secret  bargains  and  discriminations,  is,  neverthe- 
less, unqualified  in  his  disapprobation  of  any 
legislation  which  would  take  efficient  cognizance 
of  corporate  methods.  With  most  railway  men 
he  assumes  that  the  whole  reform  is  to  be  ac- 
complished by  the  persons  who  are  in  control 
of  the  railway  interest;  that  the  vices  of  rail- 
way management  are  to  be  overcome  by  incul- 
cating self-restraint  among  the  interested  parties. 
After  reciting  some  of  the  secret  practices  of  the 
railway  managers,  he  says  : 

"  It  will  be  asked  why  the  penalties  of  the 
Interstate  Commerce  Act  are  not  enforced 
against  those  who  thus  directly  and  indirectly 
evade  its  provisions.  The  question  may  be 
asked  of  me,  '  Why  do  you  not  give  infomia- 


PUBLIC  RESPONSIBILITY.  /I 

tion?  and  institute  proceedings  under  the  law  ? ' 
I  merely  say,  in  reply,  '  that  apart  from  a  preju- 
dice against  being  an  informer,  while  I  am 
morally  sure  that  these  things  are  done,  I  can- 
not furnish  legal  proof  of  them.  My  informa- 
tion comes  indirectly,  or  at  second  hand;  and 
while  I  have  no  doubt  myself  of  its  accuracy, 
yet  if  I  were  brought  to  book  as  to  time  and 
place  and  circumstance,  I  could  not  give  them. 
The  thousand  evasions  of  the  Interstate  Com- 
merce Act  cannot  be  proved  in  court.  Yet, 
among  us  railroad  men,  the  fact  that  these 
things  are  done  is  notorious.7  " T 

Whilst  it  is  quite  true  that  these  detailed  in- 
stances of  evasion  cannot  clearly  be  brought  to 
light  by  any  judicial  process  as  yet  provided, 
and  that  "  the  thousand  evasions  of  the  Inter- 
state Commerce  Act  cannot  be  proved  in  court," 
it  must  be  seen  that  even  if  instances  of  evasion 
could  be  thus  proved,  nevertheless  in  a  system 
so  comprehensive  as  is  the  railway  system,  these 
special  disclosures  would  not  correct  the  general 
evil.  The  railway  men  who  are  protected  by  a 
great  system  of  secrecy  will  simply  find  it  neces- 
sary, upon  such  special  disclosure,  to  shift  their 
evasions  to  some  other  quarter ;  to  make  some 
new  bargain  and  continue  their  old  methods. 

1  "  The  Interstate  Commerce  Act":  An  Address  by  Charles  Francis 
Adams,  p.  3.  (Rand  Avery  Supply  Co.,  Boston,  1888.) 


72  RAILWAY  SECKECY. 

When  one  discrimination  is  disclosed,  a  new  and 
more  subtle  one  will  thus  take  its  place. 

Mr.  Adams  says,  concerning  some  of  the 
recent  artifices  resorted  to  since  the  enactment 
.of  the  Interstate  Commerce  Act :  "  Names  of 
members  or  employes  of  firms  whose  business  it 
was  desirable  to  secure,  but  to  whom  it  was  un- 
lawful openly  to  allow  a  rebate,  have  been  put 
upon  the  pay-rolls  of  companies  at  salaries 
equal  to  the  estimated  amount  of  what  the  re- 
bate would  have  been ;  where  the  influence  of 
a  particular  person  was  thought  necessary  to 
secure  certain  shipments,  he  has  been  advised 
that  the  company  wished  to  consult  him,  but  in 
order  that  it  might  do  so  more  conveniently  he 
must  live  in  a  house  in  a  certain  quarter — and 
the  rent  of  that  house  has  been  paid  by  the 
company;  where  it  was  thought  expedient  to 
cut  the  rate  on  passenger  tickets  to  a  given 
point  without  affecting  the  rates  to  intermediate 
points  under  the  Interstate  Commerce  Act, 
tickets  to  that  point  have  been  placed  by  the 
hundred  in  the  hands  of  '  scalpers,'  and  they 
were  allowed  a  commission  equal  to  half  the 
price  of  the  ticket.  This  commission,  the  allow- 
ance of  which  the  Act  did  not  specifically  for- 
bid, the  ' scalper'  again  shared  with  the  pur- 
chasers of  the  tickets."  * 

1  Ibid.,  p.  3. 


PUBLIC  RESPONSIBILITY.  73 

Mr.  Adams  thus  plainly  sees  that  the  radical 
evils  of  the  railway  system  consist  in  "  absence 
of  faith,"  "  insatiable  greed  "  and  "  a  low  sense 
of  commercial  honor."  Concerning  remedies,  he 
is  of  opinion  that  "  with  the  body  politic  as  with 
the  human  body,  a  mistaken  remedy  only  aggra- 
vates the  disease."  But  he  does  not  seem  to 
me  to  realize  that  the  method  of  treatment 
which  he  himself  suggests  tends  to  produce  an 
aggravation  of  the  disease  through  such  mis- 
taken remedy.  His  first  great  remedial  sugges- 
tion is  to  give  legislative  sanction  and  encour- 
agement to  railway  combinations  (which  he 
rather  euphemistically  calls  "  contracts  made 
among  railroads"),  and  then  to  impress  upon 
these  combinations,  by  persuasive  words,  the 
general  duty  of  justice  and  honesty.  "  If,"  he 
says,  "  the  anti-pooling  provisions  of  the  Act 
may  not  be  wholly  repealed,  let  them  at  least 
be  so  modified  that  contracts  made  among  rail- 
roads, subjected  to  the  approval  of  the  Interstate 
Commerce  Commission,  for  the  division  of  com- 
petitive traffic  at  reasonable  rates,  may  be  bind- 
ing in  law ;  then  more  and  most  of  all,  encourage 
and  facilitate  any  movement  among  those  inter- 
ested which  will  tend  to  raise  the  standard  of 
commercial  morality  in  railroad  circles."  * 

A  trade  combination  for  the  division  of  traf- 
1  ibid.,  P.  9. 


74  RAIL  WA  Y  SECRECY. 

fic  among  corporations  which  derive  their  profit 
from  a  great  industry, — a  combination  which 
shall  be  binding  in  law,  and  which  may  be  sus- 
tained by  a  judicial  body,  involves  the  violation 
of  a  structural  principle  of  political  government 
in  a  free  state,  and  one  to  which  there  can  be 
no  safe  exception.  While,  as  I  have  heretofore 
shown,  such  combinations  in  trade  as  those 
which  I  have  designated  as  trusts  of  the  second 
class,  may  sometimes  be  left  by  the  legislature 
to  run  their  course,  and  to  meet  their  doom 
under  the  ultimate  persistency  of  economic  law, 
there  are  no  trade  combinations  whatever  which 
can  receive  the  sanction  of  the  legislature,  with- 
out surrender  of  some  part  of  the  principle  of 
equal  industrial  right.  We  may  concede  that 
combination  might  possibly,  for  a  time,  be  bene- 
ficially employed  even  by  corporate  powers. 
But  it  is  certainly  impossible  that  it  could  be 
permanently  so  employed,  and  the  fact  remains 
that  such  combination  can  never  be  depended 
upon  to  maintain  continued  self-restraint  among 
the  participants,  unless  such  restraint  in  some 
way  conduces  to  the  private  gain  of  these  par- 
ticipants. Continued  forbearance  where  public 
right  is  concerned  is  totally  foreign  to  the  na- 
ture of  such  combinations,  and  it  is  the  oppor- 
tunity for  oppression  that  they  afford  that 
makes  them  illicit,  even  thongh  they  were 


PUBLIC  RESPONSIBILITY.  J$ 

entered  into  with  the  determination,  upon  the 
part  of  some  of  those  in  control,  strictly  to 
practise  the  larger  self-restraint.  Railway  com- 
binations have  essentially  personal  ends.  We 
cannot  close  our  eyes  to  the  reason  for  their 
being.  Their  prevailing  motive  is  not,  and 
cannot  be,  to  correct  evils  which  oppress  the 
public.  Whatever  the  first  intention  which 
actuates  those  in  control  of  them  may  be,  their 
conduct  will  inevitably  gravitate  into  congruity 
with  their  interests.  They  will  be  found  zeal- 
ous for  the  correction  of  those  evils  only  which 
affect  their  profits,  and  in  a  short  time  the  equal 
industrial  right  of  the  citizens  will  be  insidious- 
ly invaded  in  the  pursuit  of  those  profits.  It 
has  become  quite  common  to  urge  that  the  rail- 
way, by  restoring  rates  through  combinations, 
would  be  enabled  to  do  justice  to  all  parties. 
It  is  not,  however,  a  question  of  ability,  but  one 
of  inherent  tendency.  If  public  right  comes  to 
be  even  temporarily  secured  through  combina- 
tion, it  is  so  secured  only  by  incident ;  it  is  a 
consideration  which  is  essentially  secondary  to 
the  whole  purpose  of  the  corporation,  namely, 
private  gain.  This  is  not  because  we  might 
wish  it  so,  or  might  wish  it  otherwise ;  it  is 
ex  necessitate  rei.  Obviously,  under  these  cir- 
cumstances, if  the  State  were  to  enact  legis- 
lation recognizing  trade  combinations,  and  if  the 


76  RAILWAY  SECRECY. 

judicial  officers  of  the  State  were  to  enforce  the 
compacts  of  such  combinations,  the  legislature 
and  the  judicial  officers  would  but  become  sup- 
porters of  an  illicit  power, — illicit  because  it 
inherently  tends  to  impair  the  industrial  rights 
of  the  citizen. 

As  to  what  is  known  as  the  "long  and  short 
haul,"  it  may  be  observed  that  it  is  not  within 
the  power  of  a  legislature,  strictly  speaking,  to 
change  geographic  distances ;  nevertheless,  the 
normal  and  natural  effect  of  distance  can  be 
interfered  with  by  artificial  means,  and  the 
State  can  confer  a  power  so  to  interfere  with 
it.  Where  it  does  so,  however,  the  effect  is 
merely  to  legalize  the  exercise  of  an  artificial 
power ;  and  when  such  power  is  conferred  on  a 
corporation  which  is  governed  by  its  own  inter- 
est, it  cannot  be  possible  that  it  will  be  judicially 
or  fairly  exercised.  A  legislative  act  making  a 
corporation  the  arbiter  of  rights  under  such 
circumstances,  is  very  much  like  an  act  em- 
powering one  of  two  suitors  to  determine  the 
cause  in  which  he  is  interested. 

There  are  many  instances  in  which  the  long 
and  short  haul  involve  questions  between  the 
citizen  and  the  railway  which  are  undoubtedly 
difficult  of  adjustment.  This  will  always  be 
the  case  so  long  as  railways  have  local  points, 
or  so  long  as  there  is  railway  competition  with 


PUBLIC  RESPONSIBILITY.  77 

water  routes.  But  difficult  of  adjustment  as 
these  questions  may  be,  when  we  are  called  upon 
to  choose  between  two  powers  as  the  resort  for 
decision,  we  shall,  if  we  will  consider  the  differ- 
ent functions  of  these  two  powers,  have  but 
little  difficulty  in  determining  which  to  choose, 
whole  purpose  of  one — the  State — is  to 
preserve  political  and  industrial  equality.  The 
main  purpose  of  the  other — the  corporation — is 
to  promote  private  gain ;  and  the  choice  ought 
to  be  particularly  easy,  when  we  remember  that 
the  corporations  have  had  almost  unrestrained 
control  of  the  problem  for  over  twenty  years. 
They  have  worked  upon  it,  with  and  without 
combination,  during  that  time,  and  they  have 
left  it  in  almost  hopeless  entanglement. 

What  I  have  said  with  reference  to  combina- 
tion of  the  more  vicious  kind  applies  with  equal 
force  to  consolidation.  This  at  least  is  the  case 
if  we  understand  consolidation  as  we  understand 
combination — in  its  most  comprehensive  sense. 
In  this  sense,  as  applied  to  railways,  it  means  the 
union  of  all  the  railway  interests  in  the  country 
under  a  single  ownership,  just  as  combination 
means  a  union  of  all  those  interests  under  a 
single  control.  The  sole  difference  between 
combination  and  consolidation  in  this  larger 
sense  is  that,  whilst  consolidation  has  a  perma- 
nent unity  by  reason  of  unified  ownership,  com- 


78  RAILWAY  SECRECY. 

bination  has  an  expedient  and  .temporary  unity 
by  reason  of  provisional  and  temporary  control. 
Such  consolidation  and  combination  are  alike 
vicious  because  their  purpose  and  effect  are  to 
abolish  all  competition  and  leave  the  regulation 
of  transportation  in  the  hands  of  those  whose 
primary  interest  is  private  profit.  Concentra- 
tion of  capital,  however,  I  understand  to  be 
quite  a  different  thing.  It  imports  the  growth 
of  several  large  competing  interests,  as  by  the 
purchase  or  association  of  the  several  trunk 
lines.  Such  separate  and  independent  growth 
is  a  natural  and,  as  I  believe,  an  irrepressible 
growth ;  and  so  long  as  these  several  lines  are 
owned  and  managed  independently  of  each 
other,  however  extensive  the  several  systems 
may  grow  to  be,  it  cannot  result  in  suppressing 
a  general  competition — competition  which  does 
not  and  cannot  exist,  either  in  complete  combi- 
nation or  consolidation.  But  I  shall  have  occa- 
sion to  refer  to  this  subject  again.  I  notice  it 
now  only  to  indicate  more  definitely  Mr.  Adams' 
position.  He  is  unqualifiedly  in  favor  of  con- 
trolling the  railway  system  of  the  country 
through  what  he  calls  "a  great  Consolidated 
Corporation  or  even  Trust." * 

I  think  it  may  be  seen  from  what  I  have 

'"Interstate    Commerce  Act":   An  address  by  Charles  Francis 
Adams,  p.  7.     (Rand  Avery  Supply  Co.,  Boston,  1888.) 


PUBLIC  RESPONSIBILITY.  Jg 

said  that  Mr.  Adams'  suggestions  involve  viola- 
tion of  fundamental  principles.  In  order  that 
these  suggestions  may  be  made  to  stand  out 
more  clearly,  I  will  briefly  formulate  what  I 
understand  to  be  his  position,  thus :  We  have  a 
system  of  railway  secrecy ;  Mr.  Adams  recognizes 
this  system  as  one  which  from  the  beginning  of 
railway  industry  has  enabled  and  prompted  its 
agents,  in  the  pursuit  of  private  gain,  to  trespass 
upon  the  common  industrial  right.  It  is  a  sys- 
tem which,  he  says,  is  characterized  by  an  "  ab- 
sence of  faith,"  by  an  "  insatiable  greed,"  and  by 
a  "  low  sense  of  commercial  honor."  It  is  a  sys- 
tem the  bad  methods  of  which,  during  the  last 
two  years,  have  been  "unprecedented  in  the 
whole  bad  record  of  the  past."  It  is  a  system 
which  has  exhibited  all  these  bad  qualities  be- 
cause they  are  inherent  in  it.  This  system  Mr. 
Adams  would  endow  by  law  with  the  power  of 
combination  in  pursuit  of  its  ends,  and  having 
so  endowed  it,  he  would  look  for  reform  through 
an  effort  "  to  encourage  and  facilitate  "  what  he 
vaguely  describes  as  "  any  movement  among 
those  interested  which  will  tend  to  raise  the 
standard  of  commercial  morality."  He  supple- 
ments this  by  offering  the  assurance  that  such 
recognition  of  railway  combination  or  of  railway 
consolidation  will  help  to  inculcate  such  morality 
and  accomplish  this  end. 

r  ^"B  R  A  ff 

OF  THE 

UNIVERSITY 

tgAUFQ*^ 


80  RAILWAY  SECRECY. 

It  seems  to  me  that  any  one,  who  will  reflect, 
must  conclude  that  men  moved  by  insatiable 
greed  and  encouraged  in  the  daily  practising  of 
dishonesty  by  a  system  which  makes  dishonesty 
almost  if  not  quite  necessary,  are  not  to  be 
turned  from  their  courses  either  through  ex- 
tending and  intrenching  the  system  in  which 
this  greed  and  dishonesty  thrive,  or  by  lectures 
delivered  to  those  men  upon  abstract  virtue. 
Such  efforts  at  reform  seem  rather  like  turning 
a  hungry  lion  upon  children,  with  the  hope  of 
restraining  the  appetite  of  the  lion  by  reasoning 
with  him,  and  at  the  same  time  reassuring  the 
children  by  telling  them  that  the  lion  is  turned 
loose  in  order  to  give  him  an  opportunity  of 
practising  self-restraint. 

Whilst  I  think  we  may  freely  admit,  from  the 
experience  of  the  past  year,  that  the  legislation 
forbidding  discriminations  in  long  and  short 
hauls  and  combination  has,  in  a  measure,  rather 
aggravated  than  removed  the  difficulties  of  the 
railway  problem,  nevertheless,  I  think  this  is 
plainly  because  that  legislation  has  not  gone  far 
enough.  Instead  of  dealing  with  the  cause  of 
the  evil,  it  has  been  dealing  with  a  few  of  its 
results,  like  an  injudicious  surgeon  who  hopes 
to  cure  a  malignant  tumor  by  irritating  its  sur- 
face instead  of  applying  the  knife. 


CHAPTER  IV. 


THE  GOVERNMENT  AND  THE  RAILWAYS. 

The  Claim  of  the  Corporation  to  Immunity  from  Examination — The 
Proper  Limit  of  State  Interference — Paternalism  not  Involved 
in  Such  Interference — The  Inadequacy  of  Past  Legislation — The 
Character  of  the  Necessary  Legislation — Public  Sentiment  in  its 
Bearing  upon  the  Stages  of  Railway  Development — The  Early 
Opposition  to  Railways — The  Era  of  State  Aid  and  Encourage- 
ment— The  Period  of  Railway  Oppression  and  Retaliatory  Legis- 
lation— The  Beginnings  of  the  Period  of  Examination  into  Po- 
litical and  Economic  Principles. 

IN  order  that  the  main  question  may  be  made 
prominent,  let  us  eliminate  certain  secondary 
questions,  and  marshal  together  the  conces- 
sions which  I  have  hitherto  made.  First,  then, 
let  us  assume  that  corporations  are  necessary 
for  the  conduct  of  such  large  enterprises  as  re- 
quire associated  capital ;  second,  that  private 
corporations — that  is,  those  organized  for  the 
conduct  of  strictly  private  business — may  be 
entitled  to  the  same  privacy  as  that  to  which 
the  individual  citizen  is  entitled  in  the  conduct 
of  his  business ;  third,  that  aggregation  or  accu- 
mulation of  capital  is  in  itself  not  a  dangerous 

6  81 


82  RAILWAY  SECRECY. 

or  harmful  thing  ;  fourth,  that>it  may  be  inexpe- 
dient to  resort  to  any  specific  legislation  con- 
cerning lesser  combinations,  such  as  those  I 
have  designated  as  trusts  of  the  second  class, 
because  these,  while  they  produce  temporary 
disorder,  may  be  expected  to  defeat  themselves. 
Let  us  finally  assume,  generally,  that  the  char- 
acteristic of  a  free  government  is  non-inter- 
ference, but  that  this  necessarily  means  that 
such  government  shall  not  only  itself  not  inter- 
fere with  individual  right,  but  also  that  it  shall 
not  permit  interference  with  that  right  by 
any  individual  or  corporation.  This  imports 
that  the  government  shall  not  only  open,  but 
shall  keep  open,  the  doors  of  opportunity  to 
talent,  virtue,  skill,  and  capital. 

Having  made  these  concessions,  the  whole 
question  becomes  narrowed  down  to  this  :  Are 
quasi-public  corporations,  which  are  operated 
for  profit,  and  which  in  the  exercise  of  their 
necessary  functions  may  injuriously  affect  indi- 
vidual industrial  rights  —  are  such  corporations 
entitled  to  immunity  from  examination  in  the 
conduct  of  their  business  ?  If  they  are  not,  and 
if  we  determine  that  systematic  secrecy  lies  at 
the  bottom  of  the  whole  trouble;  that  this 
secrecy  is  an  obstacle  not  only  to  the  right  con- 
duct of  business,  but  to  the  examination  into 
the  nature  and  extent  of  the  misconduct ;  and 


THE   GOVERNMENT  AND  THE  RAILWAYS.      83 

if  we  conclude  that  this  state  of  affairs  can  be 
corrected  only  by  governmental  supervision  and 
control,  the  next  point  to  be  considered  will  be 
the  extent  and  the  limit  to  which  such  super- 
vision and  control  can  safely  go. 

There  are  those  among  the  reformers  who  are 
so  pre-occupied  in  considering  the  manifest  evils 
of  State  interference  that  they  instinctively  dread 
to  examine  any  proposition  which  suggests  such 
recourse  as  necessary. 

I  think  this  may  be  said  to  be  the  case  among 
many  of  those  who  are  opposed  to  the  theory 
and  practice  of  protection.  They  see  the  guar- 
anties of  liberty  and  security  weakened  by  the 
State  itself,  in  its  interference  under  the  theory 
of  protection,  and  they  thereby  come  to  con- 
clude that  all  State  interference  must  be  neces- 
sarily vicious.  But  if  it  is  vicious  for  the  State 
itself  to  interfere  with  the  common  right,  it  is 
also  wrong  for  it  to  allow  such  interference.  An 
examination,  therefore,  of  the  true  functions  of 
State  activity  should  lead  us  to  measure  both 
the  virtue  and  the  vice  of  such  activity,  by  its 
purpose  and  its  effect.  So  measuring  it,  we 
shall  find  that  where  industrial  liberty  is  the 
object  to  be  secured,  it  is  quite  as  necessary  for 
the  State  to  exert  activity  in  order  to  prevent 
any  of  its  artificial  creatures  from  interfering 
with  this  industrial  liberty,  as  it  is  for  the  State 


84  RAILWAY  SECRECY. 

itself  to  refrain  from  exerting  activity  by  direct 
interference  with  it.  And,  indeed,  upon  closer 
examination  we  shall  find,  of  the  two  kinds  of 
interference  with  this  liberty,  that  which  is  ex- 
erted by  the  creature — the  corporation — is  far 
more  dangerous  than  that  which  is  exerted  by 
the  State  itself  ;  for  of  the  latter  it  may  at  least 
be  said  that  the  interference  is  publicly  con- 
ducted and  that  the  revenues  which  are  derived 
from  it  belong  to  the  people ;  whilst  of  the  for- 
mer kind,  the  "  protection  "  exerted  by  the  cor- 
poration is  secret  and  its  revenues  belong  to  a 
corporation.  If  we  will  further  look  behind 
names  and  appearances  to  the  structure  of 
things,  we  may  be  led  to  ask  what  can  be  more 
"  protective,"  in  the  worst  sense  of  that  word, 
than  the  systematic  exactions  made  by  a  rail- 
way company  upon  the  flourishing  industries  of 
a  mining  camp  of  one  community  under  the 
pretext  of  encouraging  the  languishing  indus- 
tries of  a  mining  camp  of  another  community  ? 
If  protection  by  the  government  aimed  against 
a  foreign  nation  and  presumably  in  behalf  of 
our  own  nation,  be  wrong  because  it  is  a  viola- 
tion of  fundamental  principles,  what  shall  we 
say  of  "  protection  "  exerted  by  a  sinister  cor- 
poration —  in  secret  —  in  order  that  a  thousand 
localities  in-our  own  country  may  be  supported 
by  exactions  from  a  thousand  other  localities  in 


THE   GOVERNMENT  AND  THE  RAILWAYS.      8$ 

the  same  country,  under  the  pretext  of  equaliz- 
ing industry,  but  with  the  more  constant  and 
real  purpose  of  securing  the  gain  of  the  railway 
corporation  ?  * 

There  are  those,  on  the  other  hand,  who  have 
given  themselves  up  so  completely  to  the  pater- 
nal idea  of  government  as  to  fancy  State  inter- 
ference in  all  things  to  be  the  panacea  for  every 
evil.  But  if,  in  the  particular  subject  under 
discussion,  we  will  make  the  distinction  be- 

1  The  following  is  part  of  the  testimony  given  by  Mr.  Charles 
Francis  Adams  before  the  Senate  Committee  on  Interstate  Commerce. 

The  Chairman. — Congress  can  do  something,  if  the  railroads  will 
help. 

Mr.  Adams. — So  far  as  I  am  concerned,  I  should  certainly  be  most 
ready  to  aid  you  to  the  full  extent  of  my  power. 

The  Chairman. — But  not  if  the  railroads  are  going  to  take  the 
position  that  there  is  nothing  that  Congress,  or  any  other  legislative 
authority,  can  do. 

Mr.  Adams. — You  will  have  very  great  difficulty  at  the  outset  in 
establishing  publicity  of  rates. 

The  Chairman. — Why  ? 

Mr.  Adams. — They  have  to  vary  at  different  places  and  at  different 
times.  I  will  state  one  case  in  point.  We  have  a  given  rate  for  the 
transportation  of  ores.  It  is  no  more  than  affords  us  a  fair  compensa- 
tion for  doing  the  business.  There  is  a  camp  which  produces  very 
low-grade  ores.  I  say  to  the  general  traffic  manager  :  ' '  That  traffic  is 
of  importance  to  us,  and  it  is  better  for  us  to  carry  it  at  a  loss,  by 
means  of  a  rebate  on  the  general  rate,  than  to  have  the  mines  close  up 
and  so  destroy  the  camp.  To  the  camp  we  carry  the  miners  and 
their  families,  we  carry  every  thing  they  eat  and  drink  and  wear  ;  and 
we  carry  out  the  ore.  We  make  something  on  the  camp  generally  ; 
and  therefore  we  cannot  afford  to  let  it  close  up,  if  by  a  reduction  in 
our  rates — even  though  we  can  reduce  them  below  the  paying  point — 
we  can  keep  it  alive."  One  would  say  that  this  was  sound  business 
reasoning.  But  if  we  could  not  allow  a  rebate  we  could  not  do  this 


86  RAILWAY  SECRECY. 

tween  functional  evils,  such  <  as  those  minor 
combinations  and  trusts  which  I  have  desig- 
nated as  of  the  second  class — evils  which  if  let 
alone  will  cure  themselves, — if  we  will  make  the 
distinction  between  these  and  those  larger  evils 
which  flourish  by  secret  alliances  of  the  railway 
managers  —  evils  which  challenge  the  power  of 
the  State  itself,  and  are  constant  menaces  to  the 
permanency  of  the  republic — I  think  we  must 

thing,  for  we  could  not  make  that  reduced  rate  general.  We  should 
go  to  pieces  if  we  did. 

Senator  Harris. — Suppose  the  transportation  companies  fix  their 
rates  upon  the  various  grades  of  freight,  and  in  the  particular  case 
you  put  you  fix  the  rate  on  ores  to  suit  the  emergency  surrounding 
that  particular  transaction  or  that  particular  place.  Is  there  any 
reason  why  that  rate,  as  well  as  every  other  rate,  may  not  be  made 
public  ? 

Mr.  Adams. — That  would  be  in  the  nature  of  a  rebate,  which  you 
say  would  be  forbidden  under  your  proposed  law. 

Senator  Harris. — It  would  be  in  the  nature  of  a  special  rate,  but 
not  quite  a  rebate  as  I  understand  rebates. 

Mr.  Adams. — The  difficulty  you  would  meet  in  the  case  proposed 
would  be  that  other  camps  differently  situated,  and  other  communities 
where  the  burden  was  not  the  same,  would  say  they  were  discrimi- 
nated against.  So  they  are.  Under  exceptional  circumstances, 
essential  to  the  life  of  a  given  community,  you  are  carrying  out 
freight  at  a  lower  rate  than  is  charged  to  any  other  community.  The 
only  answer  would  be,  that,  if  you  did  not  do  so,  the  community  in 
question  could  not  live. 

Senator  Harris. — You  are  thus  trying  to  break  down  with  your 
railroad  this  law  of  the  survival  of  the  fittest,  and  yet  you  do  not 
think  the  government  ought  to  break  it  down. 

Mr.  Adams. — That  is  perfectly  true.  That  is  one  of  the  make- 
shifts to  which  we  have  to  resort  in  order  to  keep  the  business  alive. 
Your  criticism  is  just. 

("  Report  of  the  Senate  Committee  on  Interstate  Commerce,"  p. 
1213,  Washington,  1886.) 


THE  GOVERNMENT  AND  THE  RAILWAYS.      8/ 

conclude  that  whilst  legislation  may  be  unwise, 
or  at  least  unnecessary,  with  reference  to  the 
evils  of  the  former  class,  it  is  imperatively  de- 
manded by  every  consideration  of  industrial 
right,  with  reference  to  those  of  the  latter  class. 
But  the  power  of  the  State  must  be  clearly 
confined  to  supervision  and  control,  and  must 
involve  no  kind  of  State  ownership  or  interest 
for  profits.  For  if  the  ultimate  rule  of  industrial 
right  which  I  have  been  endeavoring  to  apply 
to  economic  practices  will  not  permit  the  cor- 
poration to  impair  the  industrial  right  of  the 
citizen ;  if  it  will  not  allow  corporation  con- 
spiracies to  exist  and  trusts  to  flourish,  because 
they  interfere  with  equal  industrial  right,  it 
will  surely,  on  the  other  hand,  not  permit  the 
government  itself  to  interfere  with  such  right  by 
becoming  a  direct  participant  in  industry;  for 
such  equal  industrial  right  can  only  be  preserved 
when  the  power  entrusted  to  guard  it  has  no 
motive  of  direct  interest  or  commercial  profit 
by  which  it  can  be  swayed.  In  the  end,  the 
essential  function  of  a  free  government  is  re- 
stricted to  the  guardianship  of  political  and 
industrial  equality,  and  this  guardianship  neces- 
sarily involves  judicial  and  impartial  relations 
to  the  subject-matter  of  control.  Such  relations 
can  only  be  maintained  where  the  guardian  has 
no  interest  whatever,  either  as  owner  or  as  com- 


i 


88  RAIL  WA  Y  SECRECY. 

petitor.  The  government  can  never  secure  a 
free  field  for  competition  to  all  the  citizens 
where  it  is  not  disinterested.  As  well  might 
we  expect  a  judge  to  decide  equally  and  fairly 
between  litigants,  when  that  judge  is  an  inter- 
ested party,  as  to  expect  a  government  to 
preserve  industrial  equality  where  its  interests 
are  involved  as  a  participant  in  profits. 

This  principle  does  not  preclude  government 
wnership  where  industrial  competition  is  not  a 
factor.  The  government  may  own  a  navy  with- 
out impairing  the  principle.  Such  ownership  is 
not  for  profit.  It  may  own  and  conduct  a  post- 
office  ;  this  is  for  convenience  and  without  profit. 
For  the  like  reason  it  may  own  and  conduct  an 
exclusive  telegraph  system.  It  has  been  the 
owner  of  vast  untenanted  lands  in  the  West. 
These  have  never  been  dealt  with  as  a  private 
owner  deals  with  his  property.  Where  part  of 
this  land  has  been  sold,  competitive  bidding  has 
not  been  resorted  to  to  effect  sales,  nor  has  there 
been  any  motive  to  secure  the  largest  price  that 
could  be  realized.  The  whole  motive  of  the 
government  in  selling  these  lands,  was  to  secure 
their  settlement  by  the  people  on  the  most 
favorable  terms,  not  for  money  value,  but  for 
the  well-being  of  the  whole  country.  It  is  true 
that  a  large  part  of  these  lands  has  been  handed 
over  to  corporations  for  the  ostensible  purpose 


THE   GOVERNMENT  AND  THE  RAILWAYS.      89 

of  promoting  railway  construction.  Whether 
this  was  wise  or  unwise,  the  government's  mo- 
tive was  not  the  same  as  that  of  a  private  owner 
who  seeks  to  make  a  profit. 

It  may  be  set  down  as  an  invariable  rule  that 
wherever  gain  is  the  motive,  that  is,  wherever 
industry  is  pursued  for  direct  profit,  the  govern- 
ment cannot  be  an  owner  or  a  participant  in 
industry,  because  it  can  never  under  such  cir- 
cumstances exercise  a  judicial  control.  It  can 
never,  as  the  possessor  of  an  industrial  interest, 
hold  in  poise  the  industrial  rights  of  those  who 
are  engaged  in  that  interest.  It  can  never  suc- 
cessfully prevent  aggression  by  one  class  upon 
another,  when  it  is  allied  with  one  class  or 
the  other ;  or  when  it  has  interests  which  are  in 
conflict  with  those  of  all  classes.  But  it  can, 
and  should,  maintain  equal  industrial  right. 

Paternalism  is  in  no  way  implied  by  such 
governmental  guardianship.  The  government, 
in  preserving  equal  industrial  right,  does  not 
trench  upon  the  non-paternal  functions;  nor 
can  it,  so  long  as  its  acts  are  in  accordance 
with  the  motive  of  keeping  the  field  clear  from 
factitious  interferences.  The  government,  for 
instance,  cannot  be  said  to  be  giving  any  pater- 
nal aid  to  a  citizen  when  it  restrains  a  robber 
from  disturbing  the  citizen's  just  accumulations. 
Such  a  governmental  act  does  not  lessen  the 


QO  RAILWAY  SECRECY. 

citizen's  incentive  for  industrial  activity  or  for 
accumulation.  It  does  not  impair  human  en- 
ergy; on  the  contrary,  it  guards  this  incentive 
and  energy  from  aggression,  by  repressing  the 
aggressor,  so  that  the  incentive  and  the  energy 
may  have  free  scope.  In  like  manner  the  gov- 
ernment affords  no  paternal  aid  whatever  to  the 
citizen  by  preventing  a  secret  conclave  of  trans- 
porters, who  create  an  aggressive  trust,  and 
thereby  obstruct  the  right  of  that  industrial  citi- 
zen to  the  free  and  fair  pursuit  of  his  business. 

If  we  will  keep  clearly  in  mind  the  distinc- 
tion between  a  power  which  is  exercised  to 
prevent  factitious  interferences  among  work- 
ers in  a  field  of  industry,  and  one  which  exists 
and  is  exerted  to  create  such  interferences,  we 
shall  see  that  these  two  powers  are  diametrically 
opposite  ;  and  that  when  they  come  in  conflict, 
if  the  one  which  employs  secret  interferences 
prevail,  our  industries  will  be  subject  to  inter- 
meddling, whether  we  call  the  dominant  power 
a  railway  corporation  or  a  State.  If,  on  the 
other  hand,  the  power  which  aims  to  prevent 
such  interference  overcome  the  one  which  fur- 
thers them,  we  shall  have  free  industry.  There 
can  be  no  phase  of  paternalism  involved  in  the 
accomplishment  of  this  end ;  it  is  simply  the 
subordination  of  an  artificial  power,  which  itself 
is  essentially  in  the  nature  of  a  paternal  inter- 
ference. 


THE   GOVERNMENT  AND  THE  RAILWAYS.      9! 

Having  thus  indicated  what  should  be  the 
limit  of  State  action,  I  will  more  specifically 
notice  one  or  two  essential  qualities  of  such 
action.  Inverting  the  order  of  a  proposition 
stated  at  the  beginning  of  this  chapter,  I  may 
say  that  if  the  government  cannot  of  right  be 
itself  an  aggressor  upon  the  industrial  equality 
of  the  citizens,  it  cannot,  by  any  delegation  of 
its  power,  permit  aggression  to  a  subordinate. 
And  whenever  such  subordinate  assumes  to  ex- 
ercise such  power,  and  does  exercise  it,  the  State 
must  not  only  punish  the  specific  iniquitous 
act,  but  when  it  appears  that  such  act  proceeds 
from  a  system,  the  State  must  exercise  such 
authority  as  is  necessary  to  prevent  the  evils 
of  that  system.  This  is  especially  the  case 
where  the  opportunities  for  such  aggressive 
conduct  are  essential  features  of  the  system 
itself. 

To  apply  this  reasoning  directly  to  the  sub- 
ject, the  legislator  seeking  to  frame  adequate 
legislation  must  bear  in  mind  that  it  is  not 
enough  to  provide  legislation  against  detailed 
wrongs,  as  they  exhibit  themselves  in  railway 
management,  where  such  wrongs  arise  from  a 
system.  I  think  we  may  infer  from  a  considera- 
tion of  the  whole  problem  that  the  erection 
of  a  court  of  inquiry  will  not  be  sufficient  to 
correct  the  whole  evil.  It  will  be  impossible 
to  constitute  a  court  properly  equipped  for 


92  KAIL  WAY  SECRECY. 

the  work  of  hearing  and  determining  all  the 
multitudinous  instances  of  railway  dereliction, 
even  where  there  are  no  obstacles  in  the  way 
of  investigation ;  much  less  will  it  be  within 
the  province  of  a  court  to  deal  with  a  vast  sys- 
tem which  demands  continuous  inspection.  This 
rather  requires  executive,  administrative,  and 
judicial  functions  combined.  By  the  very  con- 
stitution of  a  court  it  can  only  deal  with  results. 
The  Interstate  Commerce  Commission  has,  from 
its  institution  to  the  present  time,  exhibited  its 
complete  inadequacy  in  this  respect.  Indeed, 
it  has  been  unable  to  deal  even  with  the  specific 
evils  which  have  come  before  it,  since  besides  a 
want  of  time  for  their  consideration,  it  has  been 
hampered  by  its  incapacity,  under  existing  law, 
to  reach  the  secrets  in  the  specific  complaints 
which  it  has  considered.  A  reform  which  would 
deal  with  an  elaborated  system  of  evil  cannot, 
therefore,  be  confined  to  treating  consequences, 
the  separate  incidents  of  the  system.  There 
must  be  a  power  which  can  go  behind  these  and 
grapple  with  causes.  There  must,  therefore,  be 
something  more  than  a  court.  There  must  be 
a  commission,  a  department  of  government, 
which  will  provide  organized  supervision  and 
inspection  against  which  the  quasi-public  corpo- 
ration can  claim  no  privacy  as  inviolable.  Such 
a  department  must  be  clothed  with  the  power 


THE   GOVERNMENT  AND  THE  RAILWAYS.      93 

to  ascertain  precisely  where  and  how  the  evils 
of  the  present  methods  originate,  and  when 
these  are  ascertained  it  must  be  able  to  apply 
the  remedy  at  the  source  of  evil.  The  remedial 
force  must  be  of  a  preventive  kind. 

I  am  quite  aware  that,  under  such  a  system, 
organized  through  federal  legislation  alone,  the 
entire  evil  will  not  yet  be  reached.  Concurrent 
with  this  federal  legislation  there  must  be  cor- 
responding State  legislation,  through  which 
similar  systems  of  inspection  and  examination 
shall  be  organized  in  the  several  States.  But  it 
must  be  seen  that  the  institution  of  such  federal 
legislation,  as  the  initial  step  towards  both  the 
ascertainment  and  the  solution  of  the  problem, 
will  educate  the  public  mind  to  the  necessity  of 
State  legislation,  and  that  this  will  follow  the 
federal  action  just  as  the  evils  come  to  be  more 
clearly  brought  to  light. 

Railway  construction  continues  to  increase 
in  the  United  States  with  immense  rapidity. 
Concurrent  with  this  increase,  and  notwith- 
standing all  the  efforts  that  have  been  made 
at  restraint,  the  aggressions  upon  political  and 
industrial  right  increase  also.  Nor  is  it  likely 
that  without  more  rigorous  control  than  is 
now  exercised,  these  aggressions  will  be  any 
less  active  than  they  are  to-day.  It  is  coming 
to  be  pretty  generally  realized  that  the  In- 


94  RAILWAY  SECRECY. 

terstate  Commerce  legislation  has  not  at 
all  fulfilled  the  expectations  of  its  friends. 
But  this  is  a  frequent  trait  of  tentative 
legislation.  It  is  not  reasonable  to  expect 
that  the  first  efforts  to  solve  a  problem,  the 
factors  of  which  are  so  hidden  and  complex, 
will  be  followed  by  complete  success.  As 
I  have  hitherto  intimated,  some  part  of  the 
legislation  which  has  been  enacted  has  had  a 
tendency  rather  to  aggravate  a  part  of  the  evil 
which  it  aimed  to  cure  ;  but  the  reason  for  this, 
when  one  examines  it,  is  quite  natural,  and 
affords  no  ground  for  discouragement.  Such 
railway  managers  as  have  been  disposed  to  be 
law-abiding,  under  the  influence  of  this  par- 
tially restrictive  legislation,  have  found  them- 
selves at  a  great  disadvantage  in  their  relations 
with  that  larger  number  who  persist  in  the  for- 
bidden use  of  secret  methods,  and  who  thereby 
increase  their  influence  and  their  profits.  The 
passage  of  the  amendment  against  pooling  has 
tended  towards  an  aggravation  of  this  condi- 
tion, notwithstanding  the  fact  that  these  restric- 
tive amendments  are  clearly  in  accordance  with 
sound  principles.  All  this,  I  say,  was  to  be 
expected  as  a  result  of  the  necessarily  incoher- 
ent and  tentative  character  of  initial  legislation 
upon  a  problem  which  is  full  of  confusing 
details.  Especially  was  it  to  be  looked  for 


THE   GOVERNMENT  AND  THE  RAILWAYS.      95 

where  the  first  efforts  of  the  legislature  were 
limited  to  attempts  at  dealing  with  these  de- 
tails, rather  than  with  the  causes  which  lay 
beneath  them.  But  this  failure  of  hoped-for 
fruits  is  no  reason  for  discontinuing  efforts  to 
reach  the  evils  which  are  hidden  in  railway 
management.  The  existing  Commission  has, 
with  all  its  limitations,  been  of  immense  im- 
portance in  educating  the  public  mind  upon 
the  problem,  and  in  giving  a  clearer  perception 
of  the  political  and  industrial  -disadvantages 
resulting  from  a  system  which  confers  suc- 
cess upon  dishonesty,  and  visits  failure  upon 
honesty.  Even  if  its  work  has  so  far  only  been 
instrumental  in  illustrating  the  political  sole- 
cism of  the  helplessness  of  honest  methods  in 
existing  railway  management,  it  must  be  ad- 
mitted it  has  accomplished  a  great  deal.  It 
has  in  this  way  indicated  the  duty  of  those 
who  should  guard  our  freedom,  to  remove  the 
hindrances  to  honesty  and  justice  by  more 
elaborate  and  definite  legislation  than  has  hith- 
erto been  enacted.  Nor  is  it  any  fault  of  the 
members  composing  the  Commission  that  the 
problem  has  remained  unsolved,  for  no  problem 
in  which  secrecy  plays  so  great  a  part  can  ever 
be  solved  until  the  factors  essential  for  solution 
are  first  brought  to  light  from  their  secret 
hiding-places.  The  Commission  has  undoubt- 


g6  RAILWAY  SECRECY. 

edly  aimed  at  unveiling  this  secrecy,  but  it  is 
plain,  upon  examination  of  its  powers  and  func- 
tions, that  it  is  not  clothed  with  the  authority 
which  will  enable  it  to  accomplish  this.  While 
the  amendment  forbidding  combinations  has 
rather  increased  than  lessened  secret  practices 
and  evasions,  a  repeal  of  that  amendment  would 
not  help  the  situation;  since  the  men  whom 
Mr.  Adams,  rather  severely,  designates  as 
"  sneak-thieves  and  pickpockets  "  would  not  by 
such  repeal  be  driven  to  relinquish  the  processes 
through  which  they  thrive. 

Inadequate  as  the  legislation  has  hitherto 
been,  it  plainly  lies  in  the  line  of  progressive 
reform.  It  is  the  first  step  towards  a  compre- 
hensive settlement  of  the  question  ;  and  I  think 
it  may  be  said  that  a  growing  public  opinion 
plainly  tends  towards  this  end.  A  brief  out- 
line of  the  history  of  railways,  as  related  to  the 
permutations  of  this  opinion  regarding  them, 
although  it  may  involve  some  little  repetition 
of  what  I  have  hitherto  said,  may  be  set  forth 
as  justifying  a  confidence  in  this  result.  Public 
opinion,  as  it  has  influenced  and  been  influenced 
by  the  railway  from  the  beginning,  presents 
rather  a  curious  study.  Following  history  from 
the  building  of  the  first  steam  railway  to  the 
present,  we  find  several  clearly  marked  epochs 
in  this  opinion  which  lie  in  logical  order. 


THE  GOVERNMENT  AND  THE  RAILWAYS.      97 

In  the  very  earliest  period  there  was  a  general 
and  emphatic  prejudice  against  all  railway  build- 
ing. This  first  found  its  loudest  expression 
among  those  whose  immediate  interests  were 
imperilled.  To  those,  for  instance,  who  were 
engaged  in  the  old  means  of  transportation,  and 
who  saw  their  investments  likely  to  be  rendered 
worthless  by  the  proposed  new  means,  the  rail- 
way corporation  seemed  to  be  only  an  invader 
of  vested  rights.  To  the  farmer,  the  arbitrary 
seizure  of  laud  and  the  appropriation  of  it  for 
railway  construction  by  a  monopoly,  naturally 
seemed  to  be  an  act  of  pure  aggression.  This 
prejudice  was  by  no  means  confined  to  those 
whose  property  was  thus  immediately  affected. 
People  fancied  they  saw  the  quiet  and  security 
to  which  they  were  accustomed  gravely  threat- 
ened. They  feared  the  accidents  which  were 
likely  to  result  from  great  trains  running  at 
high  speed  over  public  highways  and  through 
cities.  Apprehensions  became  common  regard- 
ing the  general  political  rights  which  were 
threatened  by  the  power  of  the  corporation. 
Besides  this,  there  were  objections  of  a  purely 
fanciful  character,  many  of  which,  while  they 
may  have  appeared  forcible  then,  seem  only 
absurd  now.  In  a  general  way,  the  railway 
corporation  was  the  physical  expression  of  a 
new  power,  greater  in  its  threat  against  personal 

7 


98  RAILWAY  SECRECY. 

liberty  than  any  thing  that  Jiad  ever  before 
existed,  at  least  in  the  history  of  industry.  But 
these  apprehensions  were  too  vague  to  have 
any  intellectual  value.  They  grew  out  of  a 
condition  which  prompts  ignorance  to  find  a 
monster  in  any  new  and  untried  power. 

When  the  few  who  were  directly  interested, 
through  motives  of  profit,  in  the  promotion  of 
this  industry,  succeeded  in  the  face  of  public 
hostility  in  constructing  short  lines  here  and 
there,  it  was  found  that  the  public  along  these 
lines  came  gradually  to  adapt  themselves  to  the 
new  means  of  transportation,  and  to  learn  the 
physical  convenience  which  resulted  from  these 
means.  As  people  began  to  appreciate  the  ease 
and  comfort  which  the  railway  brought,  their 
prejudices  partly  yielded  to  this  sense  of  con- 
venience. The  farmers  living  off  the  line  of  the 
railway,  who,  by  tardy  means  and  at  a  compara- 
tively great  expense,  were  obliged  to  haul  their 
products  by  team  to  a  local  market,  slowly  came 
to  realize  that  he  who  had  railway  facilities  for 
the  transportation  of  his  goods  had  greatly  the 
advantage.  Gradually  that  which  had  been 
generally  regarded  as  an  unmitigated  evil  came 
to  appear  in  the  guise  of  a  blessing;  and  as 
railway  building  proceeded,  and  as  the  conven- 
iences of  transportation  were  furthered,  the 
objections  came  to  be  forgotten  or  ignored.  The 


V 

THE   GOVERNMENT  AND  THE  RAILWAYS.      99 

commercial  traffic  of  the  past  began  to  appear 
insignificant  in  comparison  with  that  of  the  pres- 
ent. As  in  the  great  West  the  railway  exhibited 
its  wonderful  capacity  for  populating  untenanted 
areas  and  for  promoting  upon  an  immense  scale 
the  growth  of  agriculture,  manufactures,  and 
the  development  of  the  mines,  the  sense  of 
convenience  became  overwhelming.  The  rail- 
way engineer  who,  in  projecting  new  routes,  had 
been  looked  upon  in  the  East,  at  first,  as  an 
intruder,  was  here  hailed  as  a  beneficent  deliv- 
erer. The  desire  to  have  railways  became  almost 
a  craze.  State  and  county  credit  were  freely 
offered  to  the  enterprising  railway  builder.  Un- 
der circumstances  which  tended  so  little  to  in- 
spection and  examination,  it  could  not  be  other- 
wise than  that  railway  aggression  should  grow 
with  rapid  strides  until  its  oppression  should 
be  severely  felt.  By  the  time  railway  construc- 
tion had  progressed  to  a  point  where  it  conferred 
general  convenience^  it  had  also  arrived  at  the 
point  when  the  element  of  aggression  began  to 
be  felt.  At  length  the  practice  of  discrimina- 
tion, the  assumption  by  the  railway  managers 
of  the  right  to  regulate  the  industrial  interests 
of  different  localities  in  accordance  with  private 
gain,  and  the  consequent  creation  of  trusts  for 
controlling  the  whole  field  of  special  industries, 
became  unendurable.  Then  there  followed  the 


100  RAILWAY  SECRECY. 

third  stage  in  public  opinion..  This  stage  was 
characterized  by  vindictive  legislation ;  at  first 
in  the  West,  where  railway  license  had  been  the 
largest.  Accompanying  this  there  was  repudia- 
tion by  States  and  counties  of  obligations  which 
had  previously  been  freely  given  to  promote 
railway  construction.  Following  this  came  re- 
strictive legislation  which,  in  some  instances, 
was  so  unreasonable  as  to  make  any  railway 
management  impossible.  Some  of  the  Granger 
legislation,  and  especially  that  of  Iowa,  was  of 
this  character,  as  were  also  some  of  the  earlier 
efforts  to  secure  congressional  legislation. 

In  none  of  these  periods  up  to  this  time  had 
public  opinion  been  moved  to  any  thing  like  a 
dispassionate  examination  of  railway  manage- 
ment in  its  relation  to  industrial  right  in  the 
larger  political  sense. 

If  the  railway  had  come  into  being  soon 
after  the  Revolution,  when  during  the  progress 
of  the  formation  of  the  Constitution  the  mind 
of  the  nation  was  vividly  alive  to  the  import- 
ance of  personal  and  individual  liberty,  it  is 
not  at  all  unlikely  that  such  a  policy  might 
then  have  been  pursued  in  regard  to  the  indus- 
trial corporation,  as  would  have  given  to  the 
public  the  advantage  of  railway  conveniences 
under  conditions  which  would  have  been  alto- 
gether consistent  with  industrial  security  and 


THE   GOVERNMENT  AND  THE  RAILWAYS.    IOI 

liberty.  It  is  not  even  impossible  that  in 
the  earliest  stages  of  railway  building,  princi- 
ples of  administration  might  have  been  estab- 
lished which  would  have  put  railway  manage- 
ment upon  a  sound  basis.  But  when  once  the 
sense  of  convenience  became  dominant,  no  rea- 
soning, I  think,  would  have  been  sufficient  to 
induce  such  an  examination  as  would  have 
resulted  in  the  necessary  legislation.  Public 
opinion  had  then  grown  too  eager  for  con- 
venience, and  too  apathetic  towards  principles, 
to  admit  of  any  restraint  whatever  upon  any  of 
the  methods  employed  for  the  furthering  of 
that  convenience.  However  clearly  an  economic 
reformer  might  then  have  set  forth  the  sound 
conditions  of  public  restraint,  his  reasoning 
would  not  to  any  extent  have  modified  the 
course  of  events.  As  a  reasoner  upon  the  situa- 
tion it  is  doubtful  whether  he  would  have  been 
listened  to  at  all.  Men  finding  physical  com- 
fort rapidly  growing  all  about  them,  were  not 
only  not  inclined  themselves  to  examine  the 
evils  in  the  system  which  provided  this  com- 
fort, but  were  disposed  to  be  impatient  of  any 
attempt  at  examination  made  by  others. 

When  we  look  then  for  the  real  influences 
which  prevailed,  we  shall  find  that  as  the  actual 
physical  demonstration  of  convenience  was 
necessary  to  induce  the  public  to  tolerate  the 


102  RAILWAY  SECRECY. 

railways  in  the  first  instance,  so.  after  they  were 
thus  tolerated,  actual  physical  demonstration 
of  aggression,  directly  and  severely  felt  by  the 
individual,  was  necessary  to  induce  this  public 
to  change  its  favor  into  opposition. 

We  may  conclude,  in  general,  that  to  most 
men  truths  must  be  taught  directly  as  object 
lessons,  in  order  that  they  may  be  induced  to 
examine  underlying  principles.  Under  con- 
ditions of  physical  convenience  it  requires  dis- 
aster, or  at  least  physical  inconvenience,  to 
induce  careful  thought  among  the  majority; 
natural  forces,  at  any  rate,  operate  far  more 
potently  upon  most  men's  minds  in  producing 
a  realization  of  economic  truths  than  do  argu- 
ments based  upon  principles.  Political  argu- 
ments only  become  really  and  generally  per- 
suasive when  there  is  an  imminent  necessity 
behind  them.  Indeed  so  long  as  an  existing 
industrial  condition  which  rests  upon  a  false 
theory  does  not  produce  disaster  or  grave  in- 
convenience, the  mass  of  people  will  not  only 
put  up  with  it,  but  will  even  approve  of  it.  It 
has  been  observed  that  the  failure  of  a  crop 
will  influence  the  farmer  and  change  the  vol- 
ume of  the  agiicultural  vote  far  more  than  will 
political  discussion  of  principles.  If  this  is  so, 
it  is  because  he  generalizes  only  from  those 
facts  which  lie  directly  within  his  experience. 


THE   GOVERNMENT  AND  THE  RAILWAYS.    103 

Whilst  he  is  quick  enough  to  realize  disturb- 
ances when  the  moving  cause  is  close  within 
view,  he  will  endure  any  degree  of  wrong,  as 
long  as  it  comes  so  indirectly  that  he  cannot 
perceive  its  source.  With  good  crops  he  is 
likely  to  submit  without  complaint  to  the  ab- 
stractions made  by  the  railway  manager,  even 
though  such  abstractions  devour  half  the  value 
of  his  crops  or  half  the  increased  value  of 
his  lands ;  and  he  will  even  support  the  very 
power  which  does  him  injury  as  long  as  it 
works  with  sufficient  indirectness  and  secrecy. 
The  exceptional  apathy  of  the  agricultural  citi- 
zen upon  the  railway  question  has  been  such 
that  for  a  long  time  nothing  could  lead  him  to 
criticise  a  railway  manager.  He  viewed  this 
manager  as  one  who  not  only  contributed  to 
but  created  his  immediate  physical  comfort, 
and  when  at  length  he  did  awaken  to  some  real- 
ization of  his  oppression,  his  instinct  at  first  led 
him  to  resentment  rather  than  quiet  examina- 
tion. All  this  progressed  under  a  law  of  hu- 
man development ;  for  it  seems  to  lie  in  the 
order  of  nature  that  man  can  only  be  brought 
to  a  realization  of  the  conditions  of  freedom 
through  actual  suffering  from  oppression. 

But  if  a  dispassionate  examination  in  its 
larger  aspect  was  not  to  be  expected  in  the 
earlier  stages  of  the  railway  industry,  never- 


104  KAIL  WAY  SECKECY. 

theless,  eacli  one  of  these  stages  came  in  natural 
sequence,  and  they  constitute  the  necessary 
material  for  such  examination. 

In  order  to  contrast  more  vividly  these  tran- 
sitional stages  of  public  opinion,  I  will  briefly 
recapitulate  them. 

In  the  first  stage,  public  opinion  exerted  itself 
against  the  railway.  This  opinion  was  born  of 
ignorance.  As  railway  construction  progressed, 
this  public  opinion  turned  in  favor  of  railways. 
This  was  born  of  recognized  convenience. 
If,  at  the  first  stage,  prejudice  distorted  the 
mind,  at  the  second  it  distorted  the  mind  and 
the  conscience,  and  was  more  continuous.  In 
the  next  stage,  the  railway  aggressions  became 
unendurable,  and  this  public  opinion  again 
turned  against  the  railways  with  vindictive  legis- 
lation. Thus  there  was  a  movement  from  a 
condition  of  passionate  hostility  to  one  of 
emotional  encouragement,  and  from  this  to  one 
of  vindictive  resentment.  In  all  these  stages  of 
opinion,  the  emotions,  while  inadequate  to  reach 
the  problem  as  an  economic  problem,  have  indi- 
cated by  that  inadequacy  the  need  of  some  other 
mode  of  solution ;  and  together  they  point  with 
certainty  to  unprejudiced  examination  as  the 
method  which  must  finally  prevail.  Here,  then, 
we  have  arrived  at  the  fourth  stage,  but  we  are 
only  upon  the  threshold.  Examination  has  not 


THE   GOVERNMENT  AND  THE  RAILWAYS.    10$ 

yet  reached  the  source  of  the  evil,  nor  will  it  be 
likely  to  do  so  until  the  veil  of  secrecy  is  re- 
moved. We  have  so  far,  then,  limited  ourselves 
to  looking  only  at  the  exterior — to  dealing  with 
results  and  details, — and  our  legislation  has 
fallen  into  accord  with  this  kind  of  examination. 
But  the  problem  having  reached  its  present 
stage  through  the  logic  of  events  themselves, 
will  by  the  same  logic  necessarily  continue  to 
move.  Having  been  driven  by  the  failure  of 
mere  expedients  to  the  patient  and  passionless 
study  of  fundamental  principles  and  their  appli- 
cation, we  may  hope  that  these  ultimate  means 
shall  not  only  not  be  abandoned,  but  shall  be 
thoroughly  and  persistently  employed. 

This  kind  of  examination  the  railway  powers, 
on  one  pretext  or  another,  are  pertinaciously 
resisting ;  but  nevertheless  it  is  one  to  which 
they  must  submit,  for  it  falls  within  the  lines 
of  logical  progress. 


CHAPTEE  V. 


THE   EFFECTS    OF    STATE   INACTION. 

The  Relation  of  Government  Inaction  to  the  Growth  of  Co-operative 
Organizations — The  Activity  of  Railway  Managers  in  Enlarging 
their  Interests  and  Power — The  Enlargement  of  Trunk  Lines 
not  Objectionable — Objections  to  the  Consolidation  of  Trunk 
Lines — The  Effect  of  Consolidation  on  Industrial  Right — The 
Present  Stage  of  Public  Opinion  as  Derived  from  Past  Ex- 
perience of  Railway  Methods — The  Argument  from  Analogy  in 
Favor  of  State  Supervision  of  Railways — The  Inadequacy  of 
Legislation  Directed  against  the  Trust  as  Such — The  Source  of 
the  Evil  in  Secret  Combinations  of  the  Trust  and  the  Railway 
— The  Necessity  of  Government  Interference  to  Prevent  Such 
Combination — The  Advantages  of  Initiative  Federal  Action,  and 
the  Probable  Necessity  for  a  Constitutional  Amendment — Cen- 
tralization not  Implied  in  Such  Federal  Legislation. 

WHEREVER  a  government  which  is  republican 
in  form  fails  to  perform  its  function  of  guarding 
the  equal  industrial  right  of  the  citizens,  there 
co-operative  organizations  formed  by  classes  of 
citizens  in  their  own  behalf  will  be  very  likely 
to  spring  up.  Such  organizations  are  not  the 
result  of  a  careful  study  of  the  situation.  They 
come  from  the  instinct  of  self-preservation  which 
is  aroused  in  the  multitude  by  discontent  at 
their  surroundings.  This  discontent  proceeds 

106 


THE  EFFECTS  OF  STATE  INACTION.          IO/ 

from  a  vague  sense  that  wrong  has  been  done- 
wrong  which  they  cannot  adequately  explain, 
or  for  which  they  do  not  see  any  correct  or 
efficient  remedy.  These  organizations  develop 
silently,  either  when  injustice  is  done  or  per- 
mitted through  the  neglect  of  the  government ; 
but  though  they  develop  silently,  they  usually 
operate  with  certainty  and  always  with  direct- 
ness. Although  reasoning  is  not  an  ordinary 
characteristic  of  the  masses,  and  the  relation  of 
cause  and  effect  is  not  apt  to  be  distinguished 
clearly,  yet  this  relation  itself  will  not  be 
severed;  it  persists,  and  will  exert  a  dynamic 
force  by  moving  the  unreasoning  mass  to  some 
sort  of  action.  If  in  a  republic  there  exists  any 
great  artificial  power  which  treats  men  as  pawns 
and  nine-pins,  then  by  the  persistence  of  natural 
law  that  power  in  the  end  must  suffer  with 
those  against  whom  it  is  exerted.  This  is  the 
course  by  which  nature,  more  constant  than 
weak  or  neglectful  governments,  begins  to  pun- 
ish infractions  of  justice,  and  by  this  beginning 
it  means  to  suggest  that  if  freedom  and  security 
are  to  continue,  grave  industrial  evils  must  cease ; 
and  that  if  freedom  and  security  fail,  the  foun- 
dations upon  which  all  industries  rest  must 
likewise  fail. 

The  instinctive  efforts  to  supply  the  failure  of 
governmental  protection  which  thus  arise,  will 


IO8  RAILWAY  SECRECY. 

manifest  themselves  just  to  the  degree  that  the 
citizens  are  possessed  of  individual  and  political 
vitality — to  the  degree  that  they  have  vital  in- 
stincts for  freedom.  Where  servility  prevails, 
the  citizens  may  tamely  accept  aggression,  and 
if  this  aggression  incidentally  produces  some 
physical  convenience,  a  submissive  people  may 
endure  it  for  a  long  time.  But  where  the  citi- 
zens are  sensitive  to  wrong,  their  efforts  at  self- 
protection  or  their  resistance  will  inevitably  be 
prompt.  Thus  the  disposition  to  counteract  the 
government's  failure  to  protect,  may  be  taken 
as  a  correct  index  of  the  individual  vitality 
that  prevails. 

Now,  in  a  country  like  ours,  where  there  is 
great  individual  activity,  and  where  the  govern- 
ment exercises  so  little  restraint  in  preventing 
trespass  upon  the  equal  industrial  rights  of  the 
citizens,  either  resentment  or  organized  self-pro- 
tection will  grow  until  the  underlying  causes  of 
the  evil  are  removed.  To  apply  this  specifically, 
it  seems  to  me  tolerably  plain  that  the  failure  of 
our  good-natured  and  easy-going  government  to 
restrain  the  aggressions  of  the  railway  corpora- 
tions furnishes  sufficient  reason  for  the  sponta- 
neous growth  and  activity  of  such  organizations 
as  the  Knights  of  Labor,  and  for  such  develop- 
ments as  railway  strikes.  More  than  this,  when 
we  consider  the  immense  and  intimate  influence, 


THE  EFFECTS  OF  STATE  INACTION.          109 

direct  and  indirect,  which  the  railway  corpora- 
tion  exerts   upon  every  industrial  act  of  the 
citizens  of  this  country,  we  have  the  underlying 
reason  for  most  of  our  industrial  disorders  and 
delusions.     Every   thing   we   eat,  every   thing 
we  wear,  every  thing  we  make,  all  our  move- 
ments, all  our  intercourse,   so  largely  depend 
upon  transportation,  that  when  this  is  controlled 
by  a  corporate  power  working  for  its  own  ag- 
grandizement, and  clothed  with  authority,  we 
can  easily  see  how  it  is  that  every  interest  in 
the  land  has  been  more  or  less  subordinated 
to   it,    and    how   every   industry   in   the   land 
is   more   or   less   unsettled   by  reason  of   this 
subjection.     In  addition  to  this  organized  pro- 
test, but  springing  from  the  same  cause,  the 
general  sense  of  individual  discontent  manifests 
itself  in  various  ways.     We  see  it  expressed  by 
jurors  who  find  unreasonable  damages  against 
railway   companies.      We   see   it   moving    our 
legislators  to  impose  excessive  taxes  upon  rail- 
way corporations — as  if  these  were  means  of 
discipline,    or    as   if   the   exercise   of   personal 
resentment   would   of    itself    produce   reform. 
But  such  methods  only  serve  to  make  the  rail- 
way managers  anxious  to  secure  a  larger  hold 
upon  power  in  order  to  counteract  these  per- 
sonal  measures.      Such    hostility   as   this   has 
made  many  of  these  managers  wish  for  what 


110  RAILWAY  SECRECY. 

they  call  a  stronger  government — that  is,  a  gov- 
ernment which  shall  place  particular  restraint 
upon  hostile  interferences  with  what  they  re- 
gard as  their  vested  power. 

If  we  judge  the  workings  of  these  self-pro- 
tective organizations  by  the  motives  which  ac- 
tuate them,  we  shall  find  that  their  methods 
are  not  logical.  Whilst,  as  I  have  heretofore 
said,  they  move  with  certainty  and  directness, 
it  is  not  the  certainty  or  directness  of  wisdom  ; 
nor  are  they  likely  to  accomplish  their  own  ulti- 
mate aims,  for  they  do  not  attempt  an  analysis  of 
the  evils  which  they  antagonize.  Nor  do  they 
seek,  by  intelligent  means,  the  solution  of  any 
economic  problem.  They  are  not  actuated  by  a 
spirit  of  patriotism,  nor  do  their  acts  tend  in  any 
respect  towards  securing  the  general  political 
welfare.  In  fact,  these  organizations  and  unions 
are  usually  moved  by  the  same  kind  of  selfish- 
ness as  that  which  characterizes  the  railway 
corporation  itself.  If  their  processes  do  not 
always  show  vindictiveness,  they  exhibit  in- 
stinctive efforts  to  counteract  one  class  of  evils 
by  the  institution  of  another  of  the  same  order ; 
and  indeed  a  disposition  to  imitate  the  methods 
of  pre-existing  aggressive  agents  usually  charac- 
terizes all  individual  or  associated  action  where 
the  law  does  not  protect.  But  that  which  I 
wish  particularly  to  emphasize,  is  that  these 


THE  EFFECTS  OF  STATE  INACTION.          Ill 

organizations  and  mistaken  methods  exist  as  a 
logical  sequence  of  those  aggressions  which  the 
government  primarily  permits.  They  are  re- 
sultant, not  original,  forces  ;  and  the  only  good 
service  which  they  render  is  that  in  some  meas- 
ure they  indicate  the  growth  of  disease  in  the 
body  politic.  But  even  this  is  an  indirect  and  un- 
intended result.  It  is  true  that  the  Knights  of 
Labor  and  like  organizations,  and  the  prevailing- 
discontent  and  irritation,  have  not  been  entirely 
contemporaneous  with  the  beginning  of  railway 
aggressions.  But  this  is  plainly  due  to  the  cir- 
cumstance that  these  aggressions  were,  as  I  have 
hitherto  indicated,  unrealized  by  the  people  so 
long  as  the  general  sense  of  convenience  was 
supreme,  or  so  long  as  it  was  not  directly  or 
gravely  disturbed.  But  it  will  be  noticed  that 
efforts  at  self-protection  and  retaliation  arose 
promptly  when  the  railway  aggressions  had 
proceeded  to  a  point  where  they  were  instinc- 
tively and  seriously  felt,  notwithstanding  the 
incidental  conveniences  conferred. 

Passing  from  this  industrial  discontent  to  a 
consideration  of  the  present  movements  of  the 
railway  corporations,  it  may  be  observed  that 
whilst  legislation  upon  the  problem  has  been 
lagging,  the  railway  managers  themselves  have 
been  quite  active,  and  this  activity  has  been  ex- 
erted by  each  of  the  trunk  lines  towards  secur- 


1 1 2  RAIL  WA  Y  SECRECY. 

ing  the  enlargement  of  its  system.  If  this 
growth  of  ownership  is  limited  to  separate 
trunk  lines — that  is,  if  it  does  not  involve  any 
combination  or  consolidation  between  these 
lines,  it  seems  to  me  to  be  a  growth  which  is 
suggested  by  both  necessity  and  convenience, 
and  one  which  falls  into  accord  with  economic 
law.  Besides,  as  I  shall  hereafter  seek  to  show, 
it  is  one  which  is  not  inconsistent  with  the 
theory  of  our  government.  When  we  examine 
the  extension  of  the  several  trunk  line  systems, 
we  shall  find  that  there  are  unquestionable 
advantages  in  its  favor.  A  trunk  line  which 
grows  by  purchase  of,  or  by  permanent  alliance 
with,  contributing  lines  tends  to  insure  greater 
facility  and  economy  in  operation.  Not  only 
is  this  greater  facility  and  economy  insured, 
but  the  government  is  also  thereby  enabled 
with  more  ease  and  certainty  to  conduct  sys- 
tematic inspection,  and  thus  to  secure  industrial 
justice  to  the  citizens.  It  must  be  borne  in 
mind,  however,  that  such  enlargement  of  the 
several  trunk-line  systems  does  not  imply  any- 
thing like  consolidation  of,  or  combination  be- 
tween, these  several  lines ;  and  it  seems  to  me 
there  is  no  ground  for  apprehension  that  any 
permanent  union  of  this  kind  will  ever  take 
place. 

The  separate  autonomy  of  these  lines  has  rea- 


THE  EFFECTS  OF  STATE  INACTION.          113 

sons  for  being  and  reasons  for  continuance  which 
are  founded  in  sound  political  economy — reasons, 
therefore,  which  will  not  lose  their  cogency. 
It  may  be  said  that  there  are  inherent  ten- 
dencies in  the  situation  itself  which  are  hostile 
to  consolidation.  The  Eastern  termini  of  these 
lines  are  at  the  seaboard,  where  there  is  an 
outlet  to  the  world.  No  one  of  these  lines 
is  wholly  at  the  mercy  of  the  others.  They 
have  not,  in  this  respect,  the  weakness  which 
the  smaller  contributing  lines  in  the  interior 
have — a  weakness  which  often  places  these 
smaller  lines  wholly  in  the  power  of  the  trunk 
lines  with  which  they  are  connected.  Under 
these  conditions  of  equal  seaboard  facilities,  no 
one  trunk  line  can  be  compelled  to  surrender 
to  the  others,  and  when  abnormal  competition 
takes  place  between  them,  each  one  of  the  con- 
testants becomes  a  like  sufferer  by  that  compe- 
tition. It  is  true  there  have  been  many  sugges- 
tions looking  to  consolidation ;  there  have  been, 
besides,  one  or  two  efforts  in  this  direction; 
but  none  of  these  has  been  signalized  by  any 
thing  like  success.1  The  manager  of  each  one  of 

1  It  has  lately  been  reported  by  the  newspapers,  that  the  control  of 
the  Chesapeake  and  Ohio  Railroad  has  been  acquired  by  those  in  con- 
trol of  the  New  York  Central  Railroad.  Accepting  this  as  true  it  is 
nevertheless  not  necessary  to  infer  from  it  that  a  complete  union  of 
even  these  two  lines  is  intended  or  will  result.  Indeed  there  are  certain 
relations  held  by  the  State  of  Virginia  toward  the  Chesapeake  and 
Ohio  Railroad  which  would  be  likely  to  interfere  with  such  a  con- 
8 


1 14  RAIL  WA  Y  SECRECY. 

the  four  great  systems  has  hitherto  exhibited  a 
strong  disposition  to  hold  the  autonomy  of  his 
line  with  great  jealousy.  There  is  an  element  of 
pride  in  separate  management  which,  brought  to 
the  test,  will  not  easily  surrender,  and  though 
the  manager  of  a  large  trunk  line  may  be  ready 
to  suggest  consolidation,  he  will  probably  ex- 
pect his  line  to  absorb  the  others  and  not  to  be 
absorbed  by  them.  The  nearest  approach  to 
general  union  that  has  ever  taken  place  has 
been  by  combinations  which  were  made  in 
times  of  severe  railway  warfare ;  but  these  have 
only  served  the  purpose  of  temporary  truces. 

I  have  said  that  one  reason  in  favor  of  concen- 
tration of  capital  by  enlargement  of  each  of  the 
several  trunk-line  systems  consists  in  the  fact  that 
the  government  can  thereby  more  easily  exercise 
an  efficient  supervision  over  railway  management. 
This  may  suggest  to  some  minds,  that  if  gov- 
ernmental supervision  is  thus  rendered  more 
easy,  it  might  be  rendered  easier  still  by  the 
consolidation  of  the  whole  railway  interest. 

summation.  But  if,  notwithstanding,  a  complete  union  is  intended, 
this  would  by  no  means  imply  a  tendency  on  the  part  of  the  large  trunk 
lines  toward  a  general  consolidation.  So  far  as  experience  goes  con- 
cerning the  large  trunk  lines,  we  know  that  even  those  of  them  which 
have  had  to  struggle  with  insolvency  have  shown  a  constant  disposition 
and  a  capacity  to  maintain  separate  existences.  The  Erie  railway  fell 
into  bankruptcy  years  ago,  and  the  Reading  and  Baltimore  and  Ohio 
roads  lately,  yet  from  one  consideration  or  another,  each  of  these  has 
maintained  its  individuality. 


THE  EFFECTS  OF  STATE  INACTION.          115 

This  would  no  doubt  be  forcible  reasoning  in 
favor  of  consolidation,  if  the  sole  purpose  of 
interstate  legislation  were  to  secure  facility  for 
governmental  inspection.  But  when  we  con- 
sider the  political  question  which  is  involved, 
we  find  that  such  consolidation  necessarily  an- 
tagonizes the  theory  of  our  government.  As 
well  might  we  argue  that  because  the  counties 
of  the  several  States  are  not  sovereign,  but  are 
subject  to  central  State  sovereignty,  therefore, 
the  States  themselves  might  better  be  governed 
by  one  sovereignty  exercised  by  a  central  gov- 
ernment. If  absolute  power  were  the  end  in 
view — that  is,  if  a  monarchy  rather  than  a 
democracy  were  sought,  this  reasoning  would 
be  conclusive.  But  the  answer  to  it  is  that 
in  a  democracy  diffusion  of  power  is  desirable 
wherever  such  diffusion  is  possible ;  and  that 
the  chief  advantage  which  we  claim  for  our 
government  over  any  other  kind  of  government 
(and  over  all  ancient  democracies)  is  that  we 
have  a  federation  of  sovereignties  by  which 
this  diffusion  is  assured.  Now,  it  must  be 
obvious  that  the  separate  autonornic  railway 
control  by  trunk  lines  is  more  in  accord  with  a 
diffusion  of  their  power  than  would  be  consoli- 
dation, and  such  autonomic  control  is,  therefore, 
more  in  accord  with  the  genius  of  our  govern- 
ment. This  seems  to  me  to  be  the  sufficient 


Il6  RAILWAY  SECRECY. 

answer,  but  besides  this  it  may  be  said  that  con- 
centration of  capital  and  ownership  as  between 
the  trunk  lines  and  their  feeders  is  a  necessity 
arising  from  physical  conditions  and  surround- 
ing circumstances,  while  consolidation  has  no 
such  reason  for  being. 

Whilst,  then,  the  separate  growth  of  the  sev- 
eral trunk  lines  is  a  necessary  growth,  it  allows 
the  operation  of  a  general  competition  for  the 
largest  part  of  the  transportation  of  freights. 
Under  these  circumstances,  it  will  be  seen  that 
the  most  important  field  for  governmental  inspec- 
tion and  regulation  is  at  the  local  points,  or  points 
which  general  competition  does  not  reach.  It 
is  true  that  a  citizen  living  in  a  locality  distant 
from  the  market,  at  a  non-competitive  point,  is 
under  an  unquestionable  disadvantage,  as  com- 
pared with  one  who  lives  near  the  market  and 
at  a  competitive  point ;  but  where  sound  economic 
conditions  exist,  this  disadvantage  is  one  which 
the  citizen  in  choosing  his  location  can  fully 
estimate.  The  value  of  his  property  will  fall 
into  accord  with  the  local  surroundings,  and  it 
will  continue  in  such  accord  so  long  as  it  is  not 
obstructed  by  factitious  interferences.  There 
ought  to  be  no  one  spot  in  the  country  where  a 
man  must  hold  his  industrial  right  upon  a  less 
secure  tenure  than  in  any  other.  But  wherever 
a  power  endowed  by  the  State  and  working  for 


THE  EFFECTS  OF  STATE  INACTION.          1 1/ 

self-interest  holds  industrial  control  of  the  situa- 
tion, the  citizen's  tenure  will  be  rendered  pre- 
carious, and  there  results  plainly  an  interference 
with  the  principle  of  industrial  equality,  which 
no  free  State  can  itself  of  right  exercise,  or  per- 
mit any  power  within  its  bounds  to  assume. 

I  have  heretofore  said  that  if  the  government 
were  to  confer  upon  one  of  two  suitors  the 
power  to  determine  a  question  between  himself 
and  the  other  suitor,  such  an  act  would  be  con- 
trary to  the  plainest  principles  of  justice.  If 
this  were  done  between  individuals  there  might 
still  remain  hope  for  occasional  justice,  because 
a  suitor,  being  human,  is  sometimes  open  to 
appeals  to  conscience ;  he  may  be  moved  by  a 
sense  of  equity  and  justice  superior  to  his  inter- 
ests. But  if  the  government  were  to  confer 
upon  a  corporation  the  power  to  decide  in  any 
industrial  dispute  between  such  corporation  and 
an  individual,  there  could  be  but  little  hope  for 
unselfish  justice.  The  corporation  is  not  an 
individual ;  it  has  not  a  conscience ;  it  has  not 
a  better  nature  to  appeal  to ;  its  sole  sense  is  its 
own  narrow  interest.  Nevertheless,  the  evil  of 
such  a  case,  great  as  it  would  be,  would  not  be- 
come universal  so  long  as  there  were  a  number 
of  these  corporations  engaged  in  general  com- 
petition for  business,  since  the  contest  between 
them  would,  at  least  at  some  points  in  the 


1 1 8  RAILWAY  SECREC  Y. 

country,  produce  relief  to  some  of  the  citizens. 
But  the  case  would  become  entirely  hopeless 
if  the  State  were  to  confer  upon  all  these 
corporations  the  power  of  unified  ownership 
and  control,  on  the  theory  that,  thus  united, 
they  would,  by  the  practice  of  self-restraint,  do 
justice. 

There  is  another  important  reason  to  be  urged 
for  strict  supervision  at  these  local  points.  If 
the  railway  managers  are  restrained  from  mak- 
ing undue  exactions  at  these  points,  then  the 
revenues  which  supply  losses  sustained  by 
abnormal  competition  in  carrying  through 
freights,  would  fail  them,  and  this  failure 
would  suggest  a  necessity  for  wholesome  re- 
straint when  contemplating  such  abnormal 
competition. 

The  railway  interests  of  the  United  States 
comprise  more  than  one  hundred  and  fifty 
thousand  miles  of  railway ;  this  constitutes  more 
than  half  of  the  railway  mileage  of  the  world. 
Under  this  system  the  transportation  for  over 
sixty  millions  of  people  is  conducted.  The 
railway  corporation  thus  has  an  influence,  direct 
and  indirect,  over  every  citizen's  right  which  is 
as  intimate  as  it  is  extensive.  Now,  in  view  of 
all  this,  we  can  readily  realize  that  to  consoli- 
date this  power  by  unity  of  ownership,  and  to 
permit  a  single  management  in  pursuit  of  gain 


THE  EFFECTS  OF  STATE  INACTION.          1 19 

to  maintain  its  course  in  secrecy,  would  indeed 
present  us  with  an  anomaly,  under  a  republican 
form  of  government.  The  suggestion  of  "  a 
great  consolidated  corporation  or  trust "  of  the 
railway  power,  which  shall  be  recognized  by 
law,  is  a  suggestion  which,  it  seems  to  me,  can 
only  come  from  the  minds  of  those  who  are 
forgetful  of  what  constitutes  a  republic. 

It  is  perhaps  safe  to  say  that  not  one  in 
a  hundred  of  the  citizens  of  this  country  is 
directly  interested  in  the  private  gains  of  the 
railways.  Probably  ninety-nine  out  of  every 
hundred,  however  they  may  be  benefited  by  the 
convenience  which  the  railways  afford,  are  in- 
jured by  the  exactions  of  the  railway  managers. 
This  ninety-nine  per  cent,  need  only  to  learn 
how  unnecessary  all  these  exactions  and  aggres- 
sions are.  Slow  as  the  general  public  have 
been  to  realize  the  full  force  of  the  question,  I 
think  it  may  be  confidently  asserted  that  before 
the  time  comes  when  a  consolidation  or  trust 
can  be  consummated,  they  will  have  learned, 
by  experience,  the  antagonism  which  must  of 
necessity  exist  between  such  a  consolidation  and 
their  own  political  and  industrial  rights  ;  and 
with  this  realization  we  may  feel  sure  that  cor- 
porate sovereignty,  working  in  secrecy  and  for 
illicit  gains,  cannot  possibly  become  established 
among  us. 


I2O  RAILWAY  SECRECY. 

If  what  I  have  heretofore  set  forth  with  ref- 
erence to  the  transition  of  public  opinion  has 
the  warrant  of  truth,  I  think  it  is  safe  to  say 
that  there  are  four  rather  definite  impressions 
which  are  gradually  permeating  the  public 
mind,  and  that  they  touch  the  core  of  the  ques- 
tion. These  are :  First,  that  the  quasi-public 
corporation  has  obtained  a  dangerous  supremacy 
which  it  is  employing  in  overthrowing  indus- 
trial liberty,  and  which,  if  unchecked,  will  ulti- 
mately extinguish  political  liberty.  Second,  that 
the  means  by  which  this  corporation  is  thus  per- 
verting industrial  liberty  are  illicit,  and  in  no 
sense  necessary  to  the  complete  furtherance  of 
industrial  activity  or  of  physical  convenience. 
Third,  that  railway  corporations  themselves 
cannot  promote  wholesome  industrial  growth  if 
they  are  permitted  to  continue  the  employment 
of  dishonest  methods  of  management.  And 
fourth,  that  these  corporations  cannot  be  made 
to  fall  into  accord  with  honest  methods  of  man- 
agement except  by  a  constant  supervision  and 
control  exercised  by  the  guardian  of  the  sover- 
eignty of  the  people — the  State.  When  these 
points,  now  indefinitely  perceived,  are  generally 
realized,  the  people  will  come  to  appreciate 
the  necessity  of  reducing  the  supremacy  of  the 
corporation  by  extirpating  the  abuses  which 
now  characterize  its  management.  Moreover,  I 


THE  EFFECTS  OF  STATE  INACTION.          121 

hold  it  to  be  measurably  certain  that,  with  this 
general  realization  by  the  public,  those  who  are 
intimately  associated  with  railway  management 
will  also  awaken  to  a  realization  that  the  extir- 
pation of  dishonest  practices  from  the  system 
will  impart  to  the  railway  interest  itself  a  basis 
of  security  which  it  does  not  now  and  cannot 
otherwise  enjoy.  When,  after  a  lapse  of  time, 
a  careful  historical  examination  shall  have  given 
to  the  world  a  perspective  view  of  the  railway 
problem,  I  think  we  shall  all  come  to  regard 
with  something  like  amazement  the  carelessness 
through  which  the  government  permitted  a 
supremacy  so  essentially  hostile  to  the  simple 
principles  which  our  forefathers  aimed  to  guard 
by  our  fundamental  law. 

In  looking  more  definitely  at  the  method  of 
procedure  necessary  to  secure  reform,  we  shall 
find  that  it  is  not  to  be  expected,  in  so  complex 
a  subject,  that  a  complete  system  of  legislation 
can  be  created  forthwith.  The  organization  of 
a  department  for  inspection  can  only  be  per- 
fected by  patient  work  and  trial.  There  are, 
it  is  true,  some  inferences  to  be  drawn  from 
existing  legislation  concerning  conditions  which 
are,  in  some  respect,  analogous  to  the  railway 
problem.  When,  after  the  civil  war,  excise 
taxes  were  imposed,  the  federal  government 
found  it  necessary  to  institute  a  system  of  in- 


122  RAIL  WA  Y  SECRECY. 

spection  and  examination,  in  -order  to  secure  an 
honest  account  of  the  taxes  due  the  govern- 
ment. Somewhat  similarly,  efforts  have  been 
made  by  legislation,  in  some  of  the  States, 
towards  securing  the  rights  of  policy-holders 
in  life-insurance  and  fire-insurance  companies. 
Then,  too,  the  federal  government  has  insti- 
tuted a  system  of  inspection  with  reference  to 
the  national  banks.  All  these  systems  seemed 
at  first  to  trench  more  or  less  upon  privacy. 
This  objection  was  not  a  new  one.  At  different 
times  for  centuries  it  has  been  urged  against 
kindred  legislation ;  it  was  expressed  with  vehe- 
mence when  the  Court  of  Chancery  first  asserted 
the  power  of  supervising  the  accounts  of  private 
trustees.  The  reasons,  however,  by  which  this 
prejudice  was  overcome,  were  found  in  the 
necessity  of  publicity  as  a  means  of  securing 
honest  conduct. 

But  after  all,  the  analogies  which  I  have 
above  suggested  concerning  a  system  of  inspec- 
tion are  rather  remote.  The  remedies  which 
the  existing  evils  of  railway  management  re- 
quire are  to  a  great  extent  sui  generis,  and  this 
is  because  the  evil  to  be  corrected  is  sui  generis. 
Although  there  have  been,  heretofore,  vast  in- 
dustrial corporations  which  have  interfered  with 
government  by  reason  of  the  sinister  motive 
which  actuated  them,  their  existence  presented 


THE  EFFECTS  OF  STATE  INACTION.          123 

a  very  different  problem  for  solution  from  that 
presented  by  the  railways  of  to-day.  The  East 
India  Company  and  the  Hudson's  Bay  Company 
were  instances  of  corporations  which  conflicted 
with  political  right ;  their  franchises,  however, 
were  not  employed  in  the  country  in  which 
they  originated ;  nor  are  they  to  be  compared 
in  the  extent  of  their  power  to  the  combined 
railway  franchises  of  this  country.  History  has 
never  before  exhibited  an  instance  of  so  exten- 
sive a  corporate  power  governing  industry  as  is 
furnished  by  the  railway  corporation.  With 
all  the  conveniences  which  the  steam  railway 
has  produced,  industry  has  never  been  so  de- 
pendent upon  the  transporters'  power  as  it  is 
to-day,  nor  has  this  power  ever  been  so  exacting 
or  aggressive. 

In  considering  the  question  of  specific  reme- 
dial legislation  with  reference  to  the  prevalent 
industrial  evils,  it  may  be  premised  that  in  order 
to  secure  complete  industrial  reform,  the  legis- 
lator must  have  at  least  two  certain  mental 
qualifications.  These  are,  first,  the  ability  to 
perceive  the  fundamental  principles  of  equal 
industrial  right ;  and,  second,  the  power  to  em- 
ploy exact  analytical  thought  upon  the  specific 
evils  to  be  remedied.  Moreover,  it  may  be  said 
that  it  is  only  by  a  union  of  these  qualifications 
that  such  adequate  reform  can  be  assured ;  be- 


124  R 'AIL  WAY  SECRECY. 

cause  however  the  legislator  may  realize  political 
truths  in  themselves,  if  the  exact  character  of 
the  evils  to  be  reached  is  not  also  understood 
and  realized,  he  will  be  unable  to  make  such  a 
thorough  application  of  his  principles  to  the 
facts  as  will  enable  him  to  gain  his  end.  I 
think  it  may  be  said  that  it  is  from  the  im- 
perfect union  of  these  qualities  in  the  same 
mind  that  we  are  presented  with  so  many 
instances  of  legislation  which  prove  abortive. 
Whilst  the  legislator  himself  may  be  moved  by 
the  most  patriotic  motives,  yet  it  must  be  seen 
that  in  dealing  with  isolated  and  multitudinous 
results  by  special  legislation,  rather  than  by 
attacking  the  underlying  causes  which  produce 
these  results,  his  efforts  will  be  likely  to  be  both 
fruitless  and  mischievous  —  fruitless,  because 
they  will  not  reach  the  causes  of  the  evils ; 
mischievous,  because  they  tend  to  interfere  with 
economic  law. 

In  the  present  session  of  Congress  a  number 
of  bills  have  been  introduced,  which  are  aimed 
generally  and  without  discrimination,  at  all 
those  combinations  of  private  corporations 
which  are  called  trusts.  If  we  will  study  the 
natural  effect  of  this  legislation,  I  think  we 
shall  discover  that  whilst  it  may  induce  a 
change  of  names  or  a  change  of  form  of  the 
organizations,  it  will  not  be  likely  to  abolish 


THE  EFFECTS  OF  STATE  INACTION.          12$ 

the  vices  which  they  practise,  since  it  will  not 
reach  the  cause  of  those  vices;  and  if  this 
cause  is  not  touched,  the  trusts,  whilst  they  may 
change  their  names,  will  only  be  warned  by  the 
hostile  legislation  to  be  more  secretive  and  in- 
sidious in  the  continuance  of  their  processes. 
If  one  needs  to  be  assured  of  this,  he  has  only 
to  examine  the  inadequacy  of  our  Interstate 
Commerce  legislation  as  exhibited  in  the  efforts 
of  the  Interstate  Commission  to  deal  with 
isolated  instances  of  railway  secrecy.  The 
cases  of  the  railways  in  their  relations  with  the 
Standard  Oil  Trust,  now  pending  before  the 
Interstate  Commerce  Commission,  will  afford 
him  the  opportunity  of  learning  how,  when 
some  of  the  secrets  which  the  railways  employ 
are  partly  exposed  through  the  limited  powers 
of  the  Commission,  new  and  more  skilful  secrets 
are  promptly  substituted  by  the  railways  for 
those  which  the  Commission  have  specifically 
forbidden.  Another  objection  to  the  legislation 
which  aims  to  deal  generally  and  indiscrimi- 
nately with  the  trusts,  lies  in  the  fact  that 
these  trusts  are  usually  composed  of  private 
corporations,  and  may  therefore  be  entitled 
to  some  sort  of  privacy  in  the  conduct  of 
their  business  which  it  will  be  difficult  for 
legislation  to  reach;  while  the  quasi-public 
corporations,  such  as  the  railways  and  the  pipe- 


126  KAIL  WAY  SECRECY. 

lines,  come  more  clearly  within  the  province  of 
federal  control  and  inspection. 

If,  then,  the  analysis  of  the  different  trusts 
which  I  have  hitherto  made  be  correct,  the 
really  dangerous  trusts,  such  as  the  Standard 
Oil  Trust,  the  Cattle  Trust,  and  the  Cotton- 
seed Oil  Trust,  will  be  found  not  to  be  inde- 
pendent forces,  nor  the  originators  of  existing 
evils,  but  forces  the  whole  existence  of  which 
depends  upon  their  secret  relations  with  the 
quasi-public  corporations. 

If  the  secrecy  of  the  quasi-public  corporation, 
therefore,  be  the  source  from  which  the  dan- 
gerous trusts  spring,  this  secrecy  is  the  point 
to  which  legislation  should  be  directed.  When 
the  railways  and  the  pipe-lines  are  brought 
within  such  govemmental  inspection  as  will 
lay  bare  their  secrets,  the  dangerous  trusts 
which  owe  their  being  to  these  secrets  must  of 
necessity  fall,  and  when  they  fall,  their  weak 
imitators — all  those  trusts  which  I  have  desig- 
nated as  of  the  second  class — will  fall  also.  It 
is  to  the  germ  of  the  evil  that  we  should  direct 
our  attention,  if  we  hope  to  eradicate  that  evil. 

When  the  distinction  between  cause  and 
result  is  clearly  maintained,  the  evils  of  the 
trust  will  be  realized  as  results  of  railway 
secrecy.  We  shall  thereupon  realize  also  that 
the  kind  of  legislation  we  need  will  be  pre- 


THE  EFFECTS  OF  STATE  INACTION.          I2/ 

ventive  rather  than  punitive ;  that  is,  instead 
of  punishing  individuals  for  pursuing  their  in- 
dustries under  a  system  of  railway  secrecy 
which  dominates  all  industry  and  makes  vice  a 
condition  of  signal  success,  we  shall  prevent 
the  further  growth  of  the  evil  by  extirpating 
through  public  inspection  the  secrecy  from 
which  it  arises. 

It  is  not  impossible  that  a  careful  examination 
of  the  basis  of  legislation  may  lead  to  the  con- 
clusion that  a  thorough  solution  of  the  problem 
will  render  necessary  some  constitutional  amend- 
ment, which  shall  enable  the  government  to 
exercise  a  more  searching  and  methodic  control 
and  inspection  of  the  quasi-public  corporations. 
When  federal  legislation  concerning  railway 
management  first  came  to  be  considered  in  Con- 
gress, the  Constitution  was  naturally  sought  as 
a  warrant  for  it.  The  third  clause  of  eighth 
section  of  Article  I.  of  the  Constitution,  which 
confers  upon  Congress  the  power  uto  regulate 
commerce  with  foreign  nations  and  among  the^ 
several  States  and  with  the  Indian  tribes,"  fur-! 
nishes  at  present  the  foundation  of  whatever 
legislation  has  so  far  been  enacted.  If  the 
Constitution  be  interpreted  by  the  light  of  con- 
temporaneous events,  we  must  concede  that  the 
framers  of  that  instrument,  in  enacting  this 
clause,  were  actuated  by  the  motive  of  prevent- 


128  KAIL  WAY  SECRECY. 

ing  import  discriminations  between  the  States, 
and  not  by  any  definite  motive  of  regulating  quasi- 
public  industrial  corporations.  These  corpora- 
tions did  not  exist  at  that  time,  nor  could  their 
growth,  their  magnitude,  or  their  qualities  have 
been  foretold.  If,  by  careful  judicial  examina- 
tion it  should  be  determined  that  this  clause  is 
not  a  sufficient  warrant  for  the  erection  of  an 
elaborate  department  of  government,  clothed 
with  the  power  of  systematically  regulating  and 
inspecting  the  vast  railway  system  of  the  coun- 
try as  it  affects  interstate  industries,  then  a 
thorough  remedy  will  involve  an  amendment  of 
the  Constitution.  If  we  hold  it  to  be  our  duty 
in  securing  political  liberty  to  look  first  and 
above  all  things  at  the  principles  upon  which 
this  liberty  rests,  and  if  we  find  these  insuffi- 
ciently set  forth  in  our  organic  law,  our  only 
course  is  to  amend  that  law  by  setting  them 
forth.  We  should  never  fail  to  remember  that 
the  great  act  of  our  independence — that  which 
made  us  a  nation  presumably  free — consisted  in 
an  appeal  from  authority  to  principle.  This 
appeal  we  finally  embodied  in  a  Constitution. 
Whilst  that  Constitution,  in  its  turn,  became 
our  authority,  it  became  so  solely  because 
it  set  forth  fundamental  principles.  If  by 
our  industrial  progress  since,  our  industrial 
conditions  have  become  so  complex  that  the 


THE  EFFECTS  OF  STATE  INACTION.          129 

simple  provisions  of  that  Constitution  have  be- 
come in  some  part  insufficient  to  provide  ade- 
quately for  the  new  order  of  things,  we  need  to 
exercise  the  same  spirit  as  that  which  actuated 
those  who  formed  that  Constitution,  by  adding 
to  its  provisions  such  guards  as  have  become 
necessary  to  protect  the  citizen  against  the 
aggressions  which  have  grown  up  incidentally 
to  our  industrial  growth.  We  should  remember 
that  no  written  paper  can  make  us  freemen, 
however  accurately  it  may  set  forth  the  defini- 
tions of  freedom.  What  we  most  need  is  a  vital 
realization  of  fundamental  principles,  and  the 
ability  to  apply  them  to  our  daily  conduct. 

It  is,  no  doubt,  dangerous  for  a  people  to  be 
too  ready  for  changes  in  their  organic  law.  This 
danger  has  been  illustrated  in  Mexico,  where 
the  caprices  of  the  people  made  their  govern- 
ment for  a  long  time  a  succession  of  revolutions. 
It  is  so  illustrated  to-day  in  Hayti.  I  do  not 
think  that  the  American  people  lie  in  any  peril 
from  this  source.  Equally  dangerous,  however, 
is  the  disposition  of  a  people  to  treat  their 
organic  law  as  an  object  of  unquestioned  rever- 
ence, and  to  worship  it  with  a  sentiment  that 
forbids  examination  or  change.  In  such  case  its 
terms  become  mere  emotional  declarations  and 
abstractions,  which  fail  in  their  influence  upon 
daily  life  and  conduct. 


130  RAILWAY  SECRECY. 

Concerning  the  ripeness  of,  time  for  specific 
legislation,  I  think  it  is  plain  that  we  have,  as  I 
have  heretofore  indicated,  arrived  through  suc- 
cessive stages  at  the  point  where  more  careful 
study  of  the  problem  has  begun — at  the 
threshold  of  reform  based  upon  deliberate  ex- 
amination. We  all  know  how  for  the  past 
twenty-five  years  legislation  has  tended  pro- 
gressively towards  details  and  has  been  pro- 
motive  of  class  interests.  During  this  time  the 
delusion  has  prevailed  that  legislative  enactment 
could  accomplish  almost  any  thing,  and  the  legis- 
lature was  resorted  to  to  support  all  sorts  of  the- 
ories. Wherever  any  one  had  an  impulse  towards 
reform  or  desired  some  special  privilege,  he  ran 
to  the  legislature  to  procure  the  passage  of  a 
special  law.  The  efforts  to  illustrate  the  om- 
nipotence of  human  legislation  have  but  served 
at  last  to  illustrate  its  impotence. 

Observing  a  tendency  of  both  vicious  and 
reforming  practices  to  run,  in  a  general  way,  in 
cycles,  I  have  called  the  present,  the  beginning 
of  a  new  era.  As  false  theories  manifest  a 
contagious  and  progressive  character  for  a 
period,  during  which  one  such  theory  gen- 
erates  another,  so  sound  economic  ideas,  when 
once  they  come  to  be  realized,  exhibit  a  like 
contagious  and  progressive  character.  There 
are  evidences  all  about  us  that  a  new  era 


THE  EFFECTS  OF  STATE  INACTION.          131 

has  set  in,  and  the  correct  office  of  legisla- 
tion is  beginning  to  be  somewhat  better  un- 
derstood as  a  means  to  an  end  which  must 
be  based  upon  fundamental  principles.  It 
would  seem  to  me  altogether  proper,  under 
these  circumstances,  that  federal  legislation 
should  precede  States'  legislation  upon  a  prob- 
lem which  needs  such  fundamental  examination, 
and  which  so  nearly  affects  the  interest  of  all 
the  citizens  of  the  country,  and  of  all  the  States 
in  their  interstate  relations,  as  does  the  railway 
problem.  Federal  legislation,  by  regulating  in- 
terstate relations  in  the  first  instance,  can  make 
an  application  of  these  principles  to  the  subject- 
matter  far  better  than  can  any  States'  legisla- 
tion. Such  initiative  federal  action  would 
secure  more  general  attention,  incite  more 
general  discussion,  and  by  exercising  a  more 
general  influence,  produce  more  homogeneous 
legislation  within  the  States,  than  could  be 
expected  by  any  initial  States'  legislation. 
Moreover,  I  think  it  altogether  reasonable  to 
expect  that  the  States  will  not  be  slow  to 
follow  the  example  of  the  general  govern- 
ment ;  that  they  will  be  prompted  so  to 
follow,  not  only  by  the  illustrations  of  re- 
form which  shall  be  furnished  through  the 
federal  legislation,  but  also  by  that  wholesome 
jealousy  which  will  actuate  each  State  to 


132  RAILWAY  SECRECY. 

express  and  emphasize  its  own  sovereignty  by 
legislation. 

Federal  legislation,  within  the  bounds  which 
I  have  indicated,  cannot  be  inconsistent  with 
the  American  theory  of  government,  not  only 
because  of  its  appropriate  and  specific  sphere 
in  regulating  Interstate  Commerce,  but  also 
by  reason  of  the  supreme  and  necessary  mo- 
tives which  must  characterize  it — motives  which 
make  it  essentially  decentralizing.  I  am  quite 
aware  that  this  decentralizing  quality  has  in 
one  way  and  another  been  often  questioned, 
not  only  by  those  to  whom  I  have  referred  as 
in  the  railway  interest,  but  also  and  particularly 
by  a  certain  school  of  economists.  Nevertheless, 
I  think  an  examination  will  show  that  the 
doubts  concerning  it  are  vague  and  general,  and 
that  they  do  not  rest  upon  careful  examination. 
It  seems  to  me  that  it  is  only  necessary  to  make 
a  careful  and  exact  statement  of  the  principle  of 
the  diffusion  of  governmental  power  in  its  ap- 
plication to  the  particular  subject,  in  order  to 
justify  the  correctness  in  theory  of  the  reform 
suggested.  There  are  reformers  who  stand  so 
in  dread  of  the  phantom  of  federal  centrali- 
zation that  they  fail  to  distinguish  between 
it  and  the  substance.  They  so  fear  clothing 
the  federal  government  with  any  power  what- 
ever that  they  dread  all  federal  action,  even 


THE   EFFECTS  OF  STATE  INACTION.          133 

though  it  be  that  which  guards  the  citizen 
against  the  very  centralization  which  they 
dread.  It  is  thus  that,  by  federal  inaction, 
they  really  encourage  a  centralizing  tendency ; 
not,  it  is  true,  centralization  exerted  by  the 
general  government  itself,  but  what  is  worse, 
centralization  exerted  by  a  usurping  State 
agent.  There  is,  for  instance,  a  reformer  who 
confidently  says  :  "  It  should  never  be  forgot- 
ten that  they  who  advocate  the  exercise  of  fed- 
eral power  upon  the  question  of  railway  control 
cannot  possibly  be  solicitous  concerning  the  true 
theory  of  federal  government.  Such  advocates 
may  justly  be  called  imperialists  ;  they  cannot 
be  called  federalists."  What  is  the  applica- 
tion of  this  to  the  case  ?  How  can  one  be 
called  an  imperialist  whose  whole  purpose  it 
is  to  restrain  an  aggressive  power  within  the 
State  from  interference  with  the  law  of  equal 
liberty  ?  What  kind  of  imperialism  is  that 
which  contemplates  the  subordination  to  the 
government  of  an  agent  which  has  itself  become 
so  imperial  that  every  citizen  feels  its  aggres- 
sions ?  There  need  be  no  difficulty  in  deter- 
mining between  the  centralizing  and  the  decen- 
tralizing quality  of  any  particular  legislation, 
where  the  whole  aim,  purpose,  and  effect  of 
that  legislation  are  to  secure  a  larger  diffusion 
of  power  than  exists,  by  preventing  interfer- 


134  KAIL  WAY  SECRECY. 

ence  with  that  diffusion  by  any  factitious  crea- 
tion of  the  State.  It  would  seem,  therefore, 
that  those  who  entertain  apprehensions  of  fed- 
eral centralization  from  such  action,  strike  at  the 
shadow  and  leave  the  substance  untouched. 

The  only  sensible  course  is  to  subject  our 
industrial  relations  to  a  more  rigid  analysis  than 
is  ever  afforded  by  those  who,  adhering  to  a 
school  of  thought,  will  accept  nothing  that  does 
not  fall  into  accord  with  the  hoard  of  maxims 
of  that  school.  It  is  a  common  characteristic 
of  these  to  draw  analogies  from  European  gov- 
ernments and  the  conditions  which  surround 
European  industries,  rather  than  from  those  con- 
ditions which  lie  immediately  about  us ;  but  our 
escape  from  the  pernicious  consequences  which 
surround  us  can  never  be  assured  by  confining 
our  attention  to  a  set  of  conditions  which  exists 
elsewhere.  There  must  be  a  determined  exam- 
ination into  the  particular  causes  which  produce 
our  own  conditions.  The  true  benefits  of  the 
laissez  faire  are  not  to  be  found  in  rigid  adher- 
ence to  deductions  ;  and  inasmuch  as  the  prac- 
tical application  of  this  doctrine  cannot  import 
that  a  man  who  robs  another  shall  not  be  inter- 
fered with  by  government,  so  also  it  can- 
not import  that  a  corporation  which  secretly 
abstracts  from  all  the  citizens  shall  not  be  re- 
strained. On  the  other  hand,  such  a  practical 


THE  EFFECTS  OF  STATE  INACTION.          135 

application  does  import  that  a  free  government 
is  an  active  power,  active  not  only  in  restraining 
itself  from  any  tendency  to  interfere  with  equal 
opportunity,  but  also  alert  in  guarding  its  citi- 
zens from  the  more  insidious  interferences  of  its 
created  agents.  If  the  doctrine  of  laissezfaire 
has  any  virtue,  it  is  because  it  is  a  proposition 
of  a  positive,  not  a  negative,  philosophy. 

I  said  at  the  beginning  of  this  essay  that  the 
only  way  in  which  we  can  solve  the  problem  of 
railway  management  is  to  put  its  methods  to 
the  rigorous  test  of  fundamental  principles. 
Has  it  been  our  habit  to  do  this  ?  I  think  not. 
The  most  fundamental  principle  of  our  govern- 
ment, as  set  forth  in  the  Declaration  of  Inde- 
pendence, is  that  which  in  substance  declares 
that  every  citizen  equally  is  entitled  to  life,  to 
liberty,  and  to  the  security  of  his  property ; 
that  these  rights  are  to  be  guarded  by  laws 
which  are  adequate  to  prevent  invasion  upon 
them.  This  principle  is  accepted  by  all  of  us 
without  question.  But  can  we  be  said  to  have 
applied  it  to  our  industrial  relations  so  long  as 
we  have  a  system  where,  when  two  men  estab- 
lish a  competitive  industry — starting  with  equal 
capital,  sagacity,  and  skill, — one  of  them  is  so 
secretly  favored  by  a  power  derived  from  the 
State,  that  he  becomes  enormously  wealthy,  and 
the  other  is  so  injured,  in  secret,  by  this  same 


136  RAILWAY  SECRECY. 

power,  that  lie  becomes  hopelessly  bankrupt? 
To  employ  an  illustration  from  judicial  decision, 
a  justice  of  the  Supreme  Court  has  defined  the 
railway  relations  to  the  State  thus  : 

"  The  highways  in  a  State  are  the  highways 
of  the  State.  Convenient  ways  and  means  of 
inter-communication  are  the  first  evidence  of 
the  civilization  of  a  people.  The  highways  of 
a  country  are  not  of  private  but  of  public  insti- 
tution and  regulation.  In  modern  times,  it  is 
true,  government  is  in  the  habit  in  some  coun- 
tries of  letting  out  the  construction  of  important 
highways  requiring  a  large  expenditure  of  capi- 
tal to  agents,  generally  corporate  bodies  created 
for  the  purpose,  and  giving  to  them  the  right 
of  taxing  those  who  travel  or  transport  goods 
thereon  as  a  means  of  obtaining  compensation 
for  their  outlay.  But  a  superintending  power 
over  the  highways,  and  the  charges  imposed 
upon  the  public  for  their  use,  always  remains  in 
the  government.  This  is  not  only  its  indefeasi- 
ble right,  but  is  necessary  for  the  protection  of 
the  people  against  extortion  and  abuse.  These 
propositions  we  deem  to  be  incontrovertible."  x 

But  is  it  the  office  of  an  agent  to  establish 
a  system  of  secrecy ;  to  usurp  the  power  of 
his  principal;  to  hold  his  secrets  from  his 
sovereign  ? 

1  U.  S.  Supreme  Court  Reports,  118,  p.  586. 


THE  EFFECTS  OF  STATE  INACTION.          137 

Now,  although  we  have  these  principles 
embodied  in  our  fundamental  law  and  judi- 
cially declared,  the  specific  means  for  secur- 
ing the  application  of  them  to  our  daily  life 
is  wanting.  The  principles  without  such 
means  of  application  are  words  which  carry  no 
weight.  They  have  no  practical  value;  they 
are  mere  declarations  of  abstract  political  vir- 
tue. The  only  possible  way  by  which  we  may 
bring  them  into  practice  in  dealing  with  rail- 
way power,  is  by  setting  up  within  the  State  a 
power  which  shall  be  more  systematic  and  more 
constant  than  the  systematic  power  by  which 
the  evils  are  perpetrated.  The  creation  of  such 
a  power  will  render  necessary  a  department  of 
government  for  the  constant  inspection  and 
publication  of  the  acts,  and  of  the  relations  to 
the  public,  of  the  quasi-public  corporation  which 
has  hitherto  ruled  us  with  the  regime  of  secrecy. 

The  questions  involved  in  the  problem  are 
not  yet  in  a  party  sense  political;  but  they 
seem  to  be  moving  towards  that  condition.  If, 
when  these  become  political  issues,  the  railway 
power  shall  have  acquired  sufficient  supremacy 
to  overcome  the  jealous  sense  of  equal  industrial 
right,  as  well  as  the  right  itself,  it  must  be  at 
the  sacrifice  of  our  Constitution,  because  politi- 
cal liberty  and  railway  aggrandizement  are 
forces  which  do  not  and  cannot  run  in  paral- 


138  RAILWAY  SECRECY. 

lei  lines.  They  are  essentially  and  diametri- 
cally opposites ;  one  or  the  other  must  be  sub- 
jected. If  the  railway  power  shall  become 
supreme,  it  is  possible  we  may  be  submissive 
enough  to  accept  a  political  existence  which 
shall  fall  into  congruity  with  the  conditions 
which  that  power  imposes.  In  that  event  we 
may  look  for  such  continued  degradation  of 
morals  and  for  such  supremacy  of  machine 
methods  in  politics  as  will  impress  upon  our 
government,  whatever  name  we  may  give  it,  qual- 
ities which  are  essentially  different  from  those 
of  real  republicanism,  democracy,  or  freedom. 


TH  K      END. 


K  FROM  WHICH  BORROWEJL 


LOAN  DEPT. 


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LD  21  A—  40m-ll  '63                                •  General  Library 
fF7fin9ai  n^  AJKTI                            University  of  California 

^  JliJ.  DU^SIU  )  4  <  D15                                                                T^rlr^l^v 

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27  &  2Q  WEST  TWENTY-THIRD  STREET 


LONDON 
24  BEDFORD  ST.,  STRAND 


QUESTIONS  OF  THE  DAY. 


AUTHOR  INDEX  TO  THE 
"QUESTIONS  OF  THE  DAY"  SERIES. 


Alexander,  E.  P.,  No.  36 

Atkinson,  E.,  No.  40 

Bagehot,  W.,  No.  28 

Baker,  C.  W.,  No.  59 

Blair,  L.  H.,  No.  35 

Bourne,  E.  G.,  No.  24 

Codman,  J.,  No.  64 

Cowles,  J.  L.,  No.  89/ 

Crookes,  W.,  No.  9 

Dos  Passes,  J.  P 

Dugdale,  R.  ]K 

Ehrich.  L.  '  <MH)23 

Ellio 

F' 


93 


Grinnell,  W.  M.,  No.  95 
Hall,  B.,  No.  71 
Hendrick,  P.,  No.  96 

Wheeler,  E. 


Hitchcock,  H.,-iNb.  37 

J?        -,  M.  P.,  No.  80 
W.  H.,  No.  39 
,  C.,  No.  75 
n,  G.  W.,  No.  25 
,  J.  S.,  No.  76 
A.  J.,  No.  66 
;n,  D.  S.,  No.  77 
3,  J.  E.  T.,  No.  23 
nhof,  J.,  Nos.  9,  30,  73,  86 
nan,  Thos.  G.,  No.  71 
.nan,  Hon.  P.,  No.  65 
ariver,  E.  J.,  No.  63 

Stokes,  A.  P.,  No.  79 

Storey,  M.,  No.  58 

Swan,  C.  H.,  No.  91 

Taussig,  F.  W.,  Nos.  47,  74 

Tourge"e,  A.  W.,  No.  88 

Tyler,  L.  G.,  No.  68 

Wells,  D.  A.,  Nos.  54,  64,  71 

P.,  No.  84 


G.  P.  PUTNAM'S  SONS,  PUBLISHERS, 

NEW  YORK  LONDON 

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